Oh boy, the Fed are really beginning to screw up. In an effort to reduce credit worries and stabilize financial markets, the Fed cut rates. However consumer prices keeps on rising, and nothing destroys market confidence like inflation.
If the Fed keeps cutting, they ending up having to start hiking, particular if inflation keeps rising.
NEW YORK (AP) — Stocks sold off Friday after a jump in consumer inflation raised concerns about how much freedom the Federal Reserve has to continue cutting interest rates. The Dow Jones industrial average gave up more than 178 points.
The Labor Department said the consumer price index rose 0.8 percent in November amid a spike in gasoline prices. The report also found large increases in the cost of clothing, airline tickets and prescription drugs.
The report raises questions about the Fed's options for priming the economy. The Fed this week lowered interest rates and announced a plan to align with other key central banks and offer loans to pressed lenders around the world. But while it wants to stimulate the U.S. economy and make lending easier among banks wary of faltering debt, the Fed also has to keep a watchful eye on inflation.
