Fed Cuts Interest Rates 0.75 Percent

The Federal Reserve slashed interest rates by a larger-than-expected three-quarters of a point today, indicating that they are far more concerned about the sluggish economy than they are about inflation. The cuts affect the federal funds rate (now at 3.5 percent), which impacts how much consumers pay on credit card debt, home equity lines of credit and auto loans, as well as the discount rate (now at 4 percent), which is what it costs banks to borrow directly from the central bank.

What this means is that things will hopefully be a little easier for consumers and businesses in the short-term, which the Fed hopes will increase spending and help the economy stave off a recession (assuming we're not already in one). But it likely also means fuel for inflation, which is already running higher than normal.

Personally, I'm not at all surprised by the move (I had been expecting a cut in the range of a half to three-quarters of a point), just disappointed. I think inflation is going to be a bigger problem for most people than the stagnant economy. The average family of four with a meager income—for whom groceries are a significant portion of their budget—is already struggling with increasing food costs (PDF). These are the people who aren't going to be helped much by cuts in interest rates... those cuts are designed mostly to help businesses, not consumers. But increasing food prices, now, those are going to affect consumers.

I'm worried about that, even if the Fed isn't.

UPDATE: Brian Wingfield of Forbes agrees with me.