Tuesday, April 15, 2008

Lower interest rates could raise the already high prices of energy and food, which are already triggering riots in developing countries. In order to offset the inflationary impact of higher imported commodity prices, central banks in those countries may r

It's time for the Federal Reserve to stop reducing the federal funds rate, because the likely benefit is small compared to the potential damage.

The rise in the U.S. inflation rate, and the adverse effects in emerging market countries, might be defensible if lower interest rates could significantly stimulate demand and reduce the risk of a deep recession. But under current conditions, reducing the federal funds interest rate from the current 2.25% by 50 or 75 basis points is not likely to do much to stimulate demand.

Posted by chris @ 10:54 PM (325 views)
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2 thoughts on “Lower interest rates could raise the already high prices of energy and food, which are already triggering riots in developing countries. In order to offset the inflationary impact of higher imported commodity prices, central banks in those countries may r

  • also sold to rent says:

    I saw this story yesterday on some of the CNBC type programs, looks like ‘the market’ may be coming to its senses and realising that not all rate cuts are good.

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  • But is anyone at the BoE listening?

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