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Will the Fed cut rates again?

Nancy Marshall-Genzer Apr 29, 2008
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Will the Fed cut rates again?

Nancy Marshall-Genzer Apr 29, 2008
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TEXT OF STORY

Renita Jablonski: The Federal Reserve kicks off a two-day meeting today. The Fed will announce tomorrow whether it’s going to cut interest rates again. It’s a tricky decision. If the Fed cuts rates too much, inflation could rear its ugly head. Marketplace’s Nancy Marshall Genzer explains.


Nancy Marshall Genzer: The Fed has been trying to keep the inflation monster at bay since it started cutting interest rates last September. Inflation loves falling rates. When they’re low, more people borrow. And it’s hard not to spend that easy money. Demand for stuff goes up and so do prices. Now, former Fed economist Doug Elmendorf says, the Fed is walking a fine line, because the inflation monster is already stirring.

Doug Elmendorf: Oil prices and gasoline prices have increased more than people expected a few months ago.

So, is the Fed worried enough about inflation to stop cutting rates? Probably not. Although we do seem to be at a tipping point. Morris Davis is also a former Fed economist. He expects one more rate cut, and then…

Morris Davis: Unless there’s some really bad and unexpected economic news, there probably won’t be any change in the interest rates for at least six months.

Concerns were raised about inflation at the Fed’s March meeting. But the Fed went ahead with an interest rate cut anyway.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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