Fed Open to Rate Cuts, but Still Worried About Inflation [View All]

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Source: Washington Post

Economic Reports Raise Specter of Stagflation

Federal Reserve Chairman Ben S. Bernanke signaled openness to further interest rate cuts today, though he also indicated that the risk of higher-than-expected inflation has increased in recent weeks and that the central bank will be watching that trend carefull

Fed policymakers, Bernanke told the House Financial Services Committee today, "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risk."

Underscoring those risks, the Commerce Department said today that orders for big-ticket durable goods fell 5.3 percent in January, more than expected. Sales of new homes fell 2.8 percent, also more than expected.

Further evidence of the trouble: Mortgage giant Fannie Mae reported today that it had lost $3.55 billion in the last three months of 2007, as mortgage defaults and other problems rippled through the housing market; and prominent homebuilder Toll Brothers said that it had lost $96 million in the first three months of its current fiscal year, a result that chief executive Robert Toll blamed at least partly on "ceaseless talk of a recession."



Read more: http://www.washingtonpost.com/wp-dyn/content/article/2008/02/27/AR2008022700967.html?nav=rss_email/components