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Fed Cut Raises Inflation Fears

Borrowers, exporters stand to gain, but critics find move 'self-defeating'

By Rob Quinn, Newser Staff

Posted Mar 19, 2008 10:27 AM CDT

(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.

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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Fed Cut Raises Inflation Fears

Borrowers, exporters stand to gain, but critics find move 'self-defeating'

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inflation • Ben Bernanke • Federal Reserve • mortgage • exports • commodities • interest rate cut • N. Gregory Mankiw • Lee Hoskins • Kenneth Rogoff

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Fed Slashes Key Interest Rate Another Quarter-Point

Board signals further cuts are no sure thing

2008 Inflation Slowest in 50 Years on Oil Prices, Economy

Slow spending, sliding energy costs lead to 0.1% CPI increase last year

Fed Weighs Emergency Rate Cut

As economy deteriorates, inflation becomes less of a concern

Fed Likely to Hold Rates— for Now

Bernanke hopes the 2% interbank rate will help economy rebound

Fed Ponders Pause in Rate Cuts—After 1 More

Experts expect a last cut to 2% before the central bank stops and waits

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Fed Cut Raises Inflation Fears

Borrowers, exporters stand to gain, but critics find move 'self-defeating'

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OTHER STORIES ON OUR RADAR

inflation • Ben Bernanke • Federal Reserve • mortgage • exports • commodities • interest rate cut • N. Gregory Mankiw • Lee Hoskins • Kenneth Rogoff

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

Fed Slashes Key Interest Rate Another Quarter-Point

Board signals further cuts are no sure thing

2008 Inflation Slowest in 50 Years on Oil Prices, Economy

Slow spending, sliding energy costs lead to 0.1% CPI increase last year

Fed Weighs Emergency Rate Cut

As economy deteriorates, inflation becomes less of a concern

Fed Likely to Hold Rates— for Now

Bernanke hopes the 2% interbank rate will help economy rebound

Fed Ponders Pause in Rate Cuts—After 1 More

Experts expect a last cut to 2% before the central bank stops and waits

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?