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A FALTERING ECONOMY? DON’T PANIC

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Even before the Federal Reserve reduced a key interest rate Wednesday, the stock market had passed judgment on this much-anticipated move and found it laudable.

Just how laudable can be seen from the biggest one-day gain in the Dow Jones Industrial Average and the fifth record high for this widelywatched market indicator in seven consecutive sessions.This week's move marks the third time since July that the Fed has cut interest rates a quarter of a percentage point - a trend that indicates the central bank thinks the economy is weakening.

Wall Street's reaction is simply its typical bad-news-is-good-news syndrome.

The bad news is that retail sales were lackluster during the key Christmas season, job growth is slow, and inventories have taken longer than ex-pected to work off.

The good news is cuts like the one this week in the interest rate that banks charge on overnight loans normally trigger an almost immediate reduction in commercial banks' prime lending rate. That makes it easier for consumers to get loans for big ticket purchases and for businesses to borrow the money needed to expand output and hire new employees.

The better news is that it's easier for the economy to adjust to a series of small changes in interest rates than it would be if the Fed waited until the economy got so slack the central bank felt compelled to make one big and sudden shift.

The best news of all is that the economy is likely much better off than the Fed's latest move on interest rates might indicate.

Though retail sales are off, consumer confidence is down, and job growth is slow, these ephemeral developments appear to have more to do with the recent spate of cold, stormy weather than with fundamental shifts in the economy.

More, the recent federal shutdown temporarily deprived consumers and financial leaders of the full range of government-gathered statistics needed to make sound economic decisions.

For now, inflation has been whipped, the economy is expanding slowly but surely, and the country remains basically strong. Though an eventual downtown can be expected because free markets tend to be cyclical, there's ample reason to be confident about America's financial future.