Fed Rate Cuts Bring Inflation Concerns

April 30, 2008 10:25:29 AM PDT
The Federal Reserve has cut interest rates by three percentage points since September and today, policy makers could cut rates again to help stimulate the economy.With the American economy continuing to struggle, many economists expect the Federal Reserve to cut interest rates for the seventh time since last fall.

But could this be the last such action for the foreseeable future?

"The market is speculating that the Fed may then take a sabbatical, move to the sidelines to see whether the rate cuts we've seen since September are taking effect," said Jeremy Batstone with Charles Stanley.

The fed is facing a tough juggling act: trying to shore up the economy without triggering inflation which can further weaken the dollar and send oil prices higher, according to analysts.

From gas and food prices to mortgage and tuition payments, President Bush blames lawmakers for what he calls the economic slow-down saying Congress has delayed legislation that could help anxious Americans. "These are tough times. People -- economists can argue over the terminology. And these are difficult times. And the American people know it and they want to know whether or not congress knows it."

But, Congressional Democrats say the problem is the Bush Administration. "The truth is, the President has closed his eyes and put his hands over his ears as these crisis have grown. Until very recently we heard the President say don't worry be happy, everything's going to be just fine. Now all of a sudden he is realizing the problems," said Senator Charles Schumer (D).

If the fed does cut rates today, most economists anticipate it to be by a quarter of a percentage point.


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