bernanke gives market a head job ..., page-22

If an economy is growing to fast (ie in an unsustainable manner) then it can be dampened by upping interest rates a little. The vice versa is also true, so if an economy is slowing down reducing interest rates help pick up growth. This occurs because the cost of borrowing becomes more expensive or cheaper depending on the scenario and causes the costs of those borrowing the money to adjust accordingly. Obviously it is all a balance. For example Australia is experiencing a resources boom that is quickly picking up pace, but our farmers are suffering a pretty severe drought. Getting the interest rate right is a very delicate balance between containing the resources boom and helping the farmers.

The US has a slowing economy so reducing rates promotes growth, and hopefully reduces the blood flow in the housing market.

A responsible economy adjusts interest rates to the benefit of all. Not perfect for everyone but a sensible and maintainable balance.

Does that answer your question?