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The Federal Reserve should think again before cutting interest rates, says Elizabeth MacDonald in Forbes.com.
 

D

on’t worry about the “R” word

The Federal Reserve should think again before cutting interest rates, says Elizabeth MacDonald in Forbes.com. Economic growth appears strong enough to withstand the “credit smack down” and avoid the “dreaded ‘R’ word”—recession. The “I” word—inflation—is another matter. Winter heating demand soon will drive up energy costs. Wheat is so expensive “even Italians have gone on a one-day pasta strike in protest.” And global money supply growth is spiraling out of hand. Cutting rates will help the “highly leveraged,” but is it the answer for the rest of us?

“Rescuing the financial markets” and “rescuing the overall economy” aren’t the same thing, said Edmund Andrews in The New York Times (free registration required). But make no mistake, the Fed will cut the overnight federal funds rate at its meeting next week. The only question is whether the drop will be a quarter point or a half. This is “a defining moment” for Fed Chairman Ben Bernanke. It’s the first time he has had to “wrestle with a major economic upheaval,” and he’s not going to wait for “irrefutable evidence of a looming downturn” before he acts.
 

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