Credit squeeze

I don’t know if I agree with Bill Gross (see article below). The Fed’s main goal is to keep inflation below two percent. We’re a bit above two percent right now. We have seen how zealous the Fed can be about this goal. I don’t think a subprime credit squeeze will force their hand and make them cut rates to the extent Bill Gross is saying here. If the credit squeeze were somehow to cause a severe economic downturn then maybe, but I don’t see that happening. The real impact of the subprime meltdown is not as exhaustive as people are making it out to be.

Gross: Credit squeeze will force Fed’s hand – MarketWatch: “Tighter lending standards and stricter regulations will slow the U.S. economy and force the Federal Reserve to cut interest rates ‘significantly’ to ‘revigorate an anemic U.S. economy,’ said Bill Gross, managing director of Pacific Investment Management Co., in his monthly investment outlook.”

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