Fed Battles to Balance Rate Cuts, Inflation

Officials fret over steep drop hampering possible recovery
By Jim O'Neill,  Newser User
Posted Feb 8, 2008 11:57 AM CST
Federal Reserve Board Chairman Ben Bernanke meets with Senate Banking Committee Chairman, Sen. Christopher Dodd, D-Conn., not shown, Wednesday, Feb. 6, 2008, in Dodd's office on Capitol Hill in Washington....   (Associated Press)
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(Newser) – Inflation worries have some Fed officials hinting that interest-rate cuts may slow down, sparking concerns among investors who expect the central bank to trim rates 75 more basis points at its March 18 meeting, reports the Wall Street Journal. Rates have been reduced 2.25% since September—to 3%--in an effort to rally the flagging economy

With the depressed housing sector and tightening credit market continuing to batter the economy, the Fed expects the situation to continue to worsen through the second quarter. Some say dropping rates too far could hurt a possible recovery in the second half of the year. The Dallas Fed president has warned that rate cuts could “juice” inflation as the economy accelerates.