Has Federal Reserve gone too far?
2008-06-23 15:40:54 (GMT) (Caymanmama.com - Business News)Greensboro, North Carolina (CaymanMama.com) — According to Wall Street, the Federal Reserve is done with the cut in interest rates. However, due to a constant fear of inflation that haunts Wall Street, many economists think that the Federal Reserve is going too far while cutting down the rates during short period of time. According to the central bank, the rate of federal funds will be at 2% post the two day meeting on Tuesday and Wednesday. This will be the first time when Federal Reserve rates will be steady ever since last September.
The rate of Federal Reserve is the key lever of Central Bank that decides the economic growth while keeping the price under control. This rate is often used as a benchmark while rates are decided which are paid by consumers on loans, mortgages and business loans. However, during a slow economy, Federal Reserve decreases the loan rate and during inflation, the rates are increased. With the scenario of price rise, it is often believed that the Federal Reserve will be increasing the interest rates so as to control the inflation. It is generally believed that the hike in interest rates will begin in 2009.
However, few people are expecting a cut in Federal Reserve rates as lower interest rate is held responsible for the present condition of US economy that has led to weak position of dollar amidst soaring food and oil prices. According to economic research director at Argus Research Rich Yamarone while blaming Fed said, “for a portion of the dollar’s weakness and higher commodity prices.”
For many economists, the problem with the Federal Reserve is the fact that it did not cut enough rates on last year amidst the sub prime meltdown of mortgages and this led to cut in the rates during present year. Fed reduced half point during September and quarter points during October/December.
CaymanMama.com - Press Release Distribution Service
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