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July 19, 2008 2:17:24 AM CDT

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Fed Cut Raises Inflation Fears

Posted Mar 19, 08 10:27 AM CDT in US,  Business 

(Newser) – The Federal Reserve's latest rate cut might boost the economy with cheaper credit, but economists worry a freed inflation genie could be behind any magic, the Washington Post reports. Commodity prices rose to record levels in expectation that the rate cut would keep demand high, and the price hikes are liable to soon filter down to the checkout line.

The rate cut will be a plus for some struggling sectors of the economy and might ease painful mortgage-rate resets, but critics wonder if the benefits will be worth taking the risk of soaring prices. "It will be very painful to squeeze the inflation out of the system when this mess is all over," noted a Harvard professor.

Source Washington Post

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Traders work as a television screen displays the Fed board rate decision announcement in a booth on the floor of the New York Stock Exchange, Tuesday, March 18, 2008.   (AP Photo/Richard Drew)
Federal Reserve Chairman Ben Bernanke pauses as he speaks at a Washington confererence, Friday, March 14.   (AP Photo/Pablo Martinez Monsivais)
The Fed's aggressive rate cut has many economists worried that '70s-style inflation rates could be poised for a comeback.   (Shutter Stock)
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Federal Reserve  • Ben Bernanke  • inflation  • mortgage  • interest rate cut  • exports  • commodities


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