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Thursday, February 14, 2008

Personal Finance QuickTake: Fed Ready to Act

Today Fed Chairman Ben Bernanke told Congress that the Fed was ready to continue to act as needed to support the economy. He also stated though that signs point to growth later in the year. The Fed has lowered interest rate 2.25% since September, lowering the rate to 3%.

From Reuters:

He acknowledged that the growth outlook has worsened over the past few months. His comments reinforced investors' expectations the central bank would lower interest rates by a half-percentage point at its next meeting on March 18.

However, the central bank chairman also said he expects sluggish growth to give way to a somewhat stronger expansion in the second half of the year as the impact of fiscal and monetary stimulus now put in place is felt. Bernanke painted a somber picture of risks facing the economy, and U.S. stock prices and the dollar fell on his gloomy assessment. In early afternoon, the Dow Jones industrial average was down more than 140 points, or 1 percent.

So it looks like more cuts are coming and they are doing whatever they can to avoid a recession, perhaps even at the cost of future growth as inflation becomes a bigger concern.


Kansas Simplicity said...

Not a huge fan of Ben....Inflation driven, dropping money into the supply in excess of the value of the economy and at the same time betting on real estate recovery so people can borrow again. As an economist, my perspective is different than Ben's and I think he MUST have inflation as the key goal of the Fed and not growth. Cycles in economy happen all the time so let this cycle happen. Working on the farm, you do some burning of the fields from time to time to remove the fuel so you do not have a class 5 fire which will move at rates faster then you can drive. Ben needs to let some fuel burn up in the downturn and think about next spring.

RacerX said...

Feels like he is pretty aware that we are in an election year! Bit of a perfect storm right now with the mortgage meltdown driving his action.

Thanks for commenting!

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