Fed cuts half a point to 1 percent
The Federal Reserve cut the target for its key interest rate to 1 percent, matching the rock-bottom hit a few years ago when Ben Bernanke said he would drop money from a helicopter if necessary to keep deflation from happening. Now deflation looks like an even bigger threat. This sentence is the Fed's communique is a beautiful understatement:
In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability.
Comments
The deflation theme has gotten plenty of play outside the Fed. But it's hard to credit with the monetary base expanding at 30%. We're certainly seeing declining business activity, but there's nothing to say we can't have an inflationary recession. Look back to the 70s. Been there, done that.
Posted by: John | October 29, 2008 5:53 PM