On May 1, 2008, at 10:32 AM, Robert Wrubel wrote:
> Thanks. In my simplistic understanding, the only weapon the Fed
> has to fight inflation is raising interest rates, an almost
> unthinkable act in the present. So I wondered why they mentioned
> it at all.
It was their way of saying "don't expect any more of these cuts for a while." Of course, if another bank hits a wall, then all bets are off.
At some point, our foreign creditors may worry that we're going to inflate our way out of our foreign debts - not just worry, but actually do something about it. The Fed has to be a little nervous about that. Especially if they are trying to inflate our way out of debt!