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Disappointed at such caution, financial markets plunged, prompting the central bankers to pile on more rate cuts within weeks; a loosening that, with hindsight, was unnecessary.The parallels are not perfect (the economy today shows clearer signs of weakness), but the lesson of 1998 is that the Fed needs to stand up to the markets.
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Investors are betting on one more rate increase before the end of the year after inflation held above the bank's 2 percent target for a third month in July.
Even the few forecasters who expect a recession see a very quick recovery, based in part on the assumption of more rate cuts.
With the Fed firmly on track to more rate increases, that trend may be over.
It raises the pressure on Greenspan for more rate cuts.
More recently, the Fed has been at the center of a campaign by progressive activists who want the central bank to hold off on any more rate increases until the economy is stronger.
I think that's something the U.S. government should always do". U.S. stocks have surged since Powell said in early January that the Fed would be "patient" on any more rate hikes.
But Chairman Jerome Powell's comments on two more rate hikes next year spooked the market.
(Lenders who take on more risk by reducing rates further will receive additional government assistance).
As Americans take on more card debt, increased interest rates will make that debt more expensive.
The Federal Reserve also signaled confidence in the economy, holding a key interest rate steady while indicating that we remain on track for two more rate hikes this year.
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