In my mind, the "right thing" would be the fed to only use rate adjustments to fight inflation. thats their party line.
the "nice thing" would be to lower rates in the face of it to keep housing going, at the expense of the dollar and inflation ... thats what greenspan did. and thats what the market BELIEVES the the fed will do (not solely fight inflation). thats why the EURUSD is where its at today and ZB isn't at 110 right now. even Fisher of FOMC himself says Germany is a shining example of fiscal discipline with their inflation and price management measures from their central bank that we should only -hope- to follow. very fascinating.
If greenspan during recession would've only raised rates perhaps.... 4-8 times, sure the economy might not have caught fire, but we also wouldn't have ended up merely transferring irrational exuberance from stock equity markets into housing markets (which we are on the verge of 'paying' for now, with commodity driven inflationary uptick and dollar devaluation). I believe the extent of his infusion of liquidity was reckless on equal proportion to 'lowering rates' might be.