Fed Reserve Takes No Rate Action
Once again the US Federal Reserve takes no action on interest rates leaving the key closely watched Federal Funds rate unchanged at 5.25%.
The Fed probably really can’t decide what it should do and when in doubt does nothing. The Fed is positioned squarely between opposing market forces.
Fed chairman Ben Bernanke acknowledged the market’s concerns about a credit crunch brought on by problems in the sub prime lending market for real estate. Some market observers had hoped for a rate decrease to help alleviate those fears.
However, any decrease in interest rates could hit the value of the US Dollar hard and lead to a higher inflation rate. Many commodity prices are already soaring so inflation may be a problem sooner than later.
With risks apparent in both directions the Fed has its work cut out for it in coming months. Probably Ben Bernanke and the other Fed board members are hoping that they and the economy can somehow muddle through.
I doubt that they or the economy will be so lucky.
