Two years ago, the Federal Reserve raised interest rates in an attempt to slow the red-hot economy. One goal was to deflate the stock market and wring the wealth effect out of consumer spending. The problem for 2001 is that the Fed may have succeeded all too well. Stock prices are sinking at a time when portfolio performance drives household sentiment and spending like never before. As a result, policymakers are being forced to act in an unusually swift and bold manner.
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