The Federal Reserve may make "substantive" cuts to interest rates later this month in the face of rising economic difficulties, Ben Bernanke said today. Citing troubled financial markets and rising unemployment, the Fed chairman implied that it might drop its target short-term interest rate by .5% from 4.25%. “We stand ready to take substantive additional action as needed to support growth,” Bernanke said.
With prices rising for food and energy, inflation is also a worry, Bernanke said during a speech in Washington that briefly moved stocks higher. "The demand for housing seems to have weakened further," he said, adding that "higher oil prices, lower equity prices, and softening home values seem likely to weigh on consumer spending as we move into 2008."