Fed to Meet as Economy Sputters

Central bank expected to tackle deflation danger
By Rob Quinn,  Newser Staff
Posted Aug 10, 2010 3:06 AM CDT
Chairman of the Federal Reserve Ben Bernanke testifies before the House Financial Services Committee.   (AP Photo/Alex Brandon, file)

(Newser) – The Federal Reserve meets today to decide what medicine the wheezing American economy needs, and world markets will be keenly watching for the outcome. With no new stimulus spending from Congress likely, the central bank is the only body poised to react to signs that the recovery is running out of steam. Many economists expect the Fed will switch focus from preventing inflation to heading off deflation, the New York Times reports.

Analysts believe that July's disappointing employment figures will spur the Fed to acknowledge that the recovery is in trouble and take steps toward pumping more money into the economy through "quantitative easing"—buying up assets with money it has created. Former Fed governor Frederic Miskin, however, warns that most recoveries hit "speed bumps," and that quantitative easing could be an overreaction with the potential to send inflation soaring.

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