Fed Cuts Rate

So they went and did exactly what everyone expected. I'm neither surprised nor dismayed by this move. A quarter point cut shouldn't throw off too much inflationary pressure, and could help reduce (but won't eliminate) economic slowdown due to the mortgage "crisis."

The next couple of months will be interesting, though. The Fed will have to watch both inflation and economic growth very closely after this move to determine their next move. Anything is possible over the next couple of months. If the economy starts to look like it's going into recession, the Fed will want to cut rates (possibly to Gross' three percent target) to stem the tide. But if prices start to climb, they're going to be under a lot of pressure to raise the rates in order to help cut inflation.

If both of those things happen, there's going to be some interesting debate on what's the best move for the national economic picture... are we more afraid of a recession or inflation? Under Greenspan, the answer was inflation, but I'm not sure what path Bernanke will take.