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Best Business Commentary
January 31, 2008
Watching the Fed behind the wheel
Well, you can’t say the Federal Reserve is “behind the curve” anymore, says The Wall Street Journal in an editorial. When faced with criticism from the “political class,” it turns out that “Nascar” Ben Bernanke just “gets in his race car and accelerates right through the curves.” Yesterday’s 50-point interest rate cut, following last week’s 75-point cut, made the markets wish for “more careful driving,” if their reaction is any indication, but Bernanke seems convinced he can drive us around a recession. We hope so. “But our advice is that everyone bring a crash helmet in case he misses a turn.”
So what is the Fed’s next turn? says Brian Wingfield in Forbes.com. “More rate cuts, though in smaller increments.” At 3 percent, the federal funds rate is well above the 1 percent of a few years back. And with the Fed emphasizing recessionary threats over inflationary concerns, the “monetary stimulus ain’t over yet.”
No, the steep cuts are probably just a detour, says John M. Berry in Bloomberg. Inflation looks high, and growth looks anemic, but those are probably temporary. Come the next Fed meeting in mid-March, “it might be clear that the U.S. economy isn’t in as much trouble as a lot of investors think.” And looking at the map from 1988, the Fed will “quickly” raise rates “to control inflation after the growth scare.”
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