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Federal Reserve Cuts Discount Rate

August 17, 2007

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 In a move that could be filed under the heading “It’s About Time”, the Federal Reserve having finally recognized that the need to stabilize the credit and housing markets outweighs the threat of inflation lowered the discount rate by one 1/2 percentage point. The discount rate is the rate that the Federal Reserve charges when making loans to banks. This move will help to loosen the credits markets that have restricted in response to the increase in the number of bad home loans. It is my opinion that since Chairman Bernanke took the helm at the Federal Reserve he has been to focused on inflation when a major cause of inflation has been a temporary rise in energy costs. We now are seeing the coast of fuel declining and inflationary pressures are moderating.

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