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Long-awaited solution?

The trouble started in the US, and the Federal Reserve's decision to cut interest rates had been awaited for weeks as one potential solution to it.

Indeed, there are worries the US might have become overly dependent on the Fed coming to the rescue at times of financial difficulty - if Superman is always there to save the day, then doesn't Lois Lane let herself get into trouble?

But at the moment, such concerns are not bothering Wall Street. They got what they wanted - the authorities to shift their recent preoccupation with inflation, and to ease the pain of those that have been suffering from their lending decisions. As it is, the US is adjusting to a slowdown - from growth rates of about three per cent, to those of about two per cent.

That adjustment is probably inevitable, as Americans move to more sustainable levels of borrowing and saving, and not even Superman can prevent that. But the goal is simply to prevent a slowdown turning into a recession, particularly given falling house prices.

However - in the UK, where similar issues arise, the heroic job of steering the economy through current stresses is being made far easier by falling inflation. If the Bank of England doesn't have to worry about that, it has more room to manoeuvre to deal with other problems, perhaps sometime following the US with lower interest rates.

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