Comments: 8-1 and quite dovish

Just a touch off topic, but reports that oil is now $90 a barrel and the dollar now sinking to a new low, didn't the US economy already have an issue with core inflation before cutting last month? Surely they'll have to reverse this decission before too long?

Posted by Dan at October 19, 2007 08:52 AM

Good point, but I'm not sure inflation is the driving force at the moment - and the expectation is of further Fed cuts.

Posted by David Smith at October 19, 2007 11:41 AM

Can you have economic growth/stimulus by way of lowering rates when you already have problems with inflation? surely thats like dumping petrol on the fire?

With their record debts, trade deficit issues, knackered property market, it's beggers belief that they are trying to borrow their way out of trouble - but I guess, what other choice have they got?

Posted by Dan at October 20, 2007 12:12 PM

Growth and inflation are related. The calculation the Fed makes, indeed all central banks make, will be that weak growth will reduce inflationary pressures. But there's an interesting battle going on in commodity markets. The $100 a barrel oil bulls want the Fed to cut and cut again to keep the US economy growing and oil demand high. The bears, who have taken a backseat, think that even if the Fed cuts, growth will weaken significantly.

Posted by David Smith at October 20, 2007 01:35 PM
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