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 September 07, 2007

Federal Reserve has the Power to end Housing Slump
An influential economist is urging the Federal Reserve Board to cut interest rates swiftly and preemptively.
Frederic S. Mishkin of the Federal Reserve Board of Governors stated in a white paper the Federal Reserve has the ability to prevent a lot of damage from a more severe slump by acting swiftly to trim interest rates aggressively.

Mishkin states that the harm that dropping home prices dies to the economy is predictable. He feels that there is no value in waiting until the damage is done. By acting swiftly, the Federal Reserve can buoy consumer spending and minimize the loss in the economic output while incurring only a slight increase in the inflation rate. He believes that such a policy can be extremely beneficial to counteracting the negative effects of a housing slump.

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