What Did Bernanke and Co. Do About This Stumbling Market?

Ben Bernanke, the Federal Reserve Chairman, and his fellow Board of Advisors took action. I think that the Federal Reserve should cut interest rates a bit more, even though they have already cut the Federal Funds Rate (what banks pay to borrow money from each other overnight) from 5.25% to 4.75% -- an aggressive 0.50-point decrease designed to "shock" the market back into life. I like what the Fed did: the cut will allow liquidity to be alive and consumer confidence to be high. If the banks are charged a lower interest rate, then they will perhaps loan out more money.

But, there is one problem that I have with this action. By reducing the interest rate, Bernanke has given inflation a chance to pick up. The US has a relatively low inflation rate compared with many other nations (this is good--believe me), but if the interest rates are decreased, then perhaps inflation might, well, inflate.

I must admit, though, the possibility of inflation picking up is remote, as the US economy is quite strong now.

~Dr. ECON