Monetary Policy

As was widely expected, the FOMC today cut the FFR% to 1.0%.
The longstanding cornerstone indicators suggested as much, and
the Fed indicated increased confidence that, with weakening
economic demand and falling operating rates, inflation would
subside to a low level over the next several quarters. They might
have spooked the markets had They not cut. Also, such forbearance
might have handed Sen. Obama another stick to use to whup
the GOP establishment.

The move will backfire if it is the proximate cause for a sell-off in
the US$ and sharp rally in the oil price. Should the latter occur,
it would ultimately put more cost pressure into a weakened system.