SEARCH BLOG: FEDERAL RESERVE
The NY Times reports:
"The Federal Reserve reduced its benchmark interest rate by three-quarters of a percentage point on Tuesday, to 2.25 percent, a cut that was less than investors had been hoping for even though it was one of the deepest in Fed history."What is at issue now is what the Fed will do when it decides once the inevitable rising inflation hits.
As I said last September, my take is that a stable 4% rate will do more for the economy in the long run than the yo-yo approach presently in play. But it is likely that the Fed will again forget what rapidly decreasing rates followed by rapidly increasing rates can do... especially with no safeguards that manipulators will not be able to take advantage of the Fed's largesse again.
"With the latest reduction, the federal funds rate is far below the rate of inflation, meaning that the “real,” or inflation-adjusted, rate is below zero. It is also well below the European Central Bank’s benchmark interest rate of 4 percent or the Bank of England’s rate of 5.25 percent."