Don’t Worry About Inflation Accelerating
October 08, 2008
The Federal Reserve has played whack-a-mole in its efforts to hold back the financial tsunami engulfing the United States and now the world. After an aggressive easing of traditional monetary policy (reducing the target federal funds and discount rates), it then invented and implemented a series of special auction facilities featuring relaxed terms and collateral requirements. These have recently been expanded further. Then only Tuesday it announced that it would try to unfreeze the commercial paper market by lending directly to corporations. Wednesday morning it announced a half-point cut in the federal funds and discount rates coordinated with the European Central Bank, the Bank of England and several others.