Fed's bold moves could have psychological risks

There's a risk in Federal Reserve Chairman Ben Bernanke's bold moves of late.

If recent history is any guide, the euphoria that met the Fed's three-quarter-point reduction to a key interest rate Tuesday could be short-lived. With a string of urgent and aggressive actions, the Fed itself could end up feeding the panicky mind-set that it so desperately wants to calm.

Even inside the Fed there was disagreement about just how much the key interest rate — its most potent tool in dealing with economic trouble — should be lowered.

Two Fed members dissented, preferring a smaller cut, while Bernanke and seven others prevailed with a more powerful three-quarter-point one. Cuts of this size are pretty infrequent. Bernanke, in an emergency session in January, ordered one — making for the single-biggest reduction in more than two decades.

Read Complete Story