While that action could be helpful, it carries some risk, said Christopher L. House, an economics professor at the University of Michigan.Of course, this logic holds if the federal funds rate is at .25. If the Fed is expecting inflation of .9% over the next year, then why should a 25 basis point cut get us to uncontrollable inflation? More likely it would shift us toward inflation of 1 or 1.1%. That's clearly some magical thinking that a 25 basis point cut, alone, would take inflation from .9% to, say, 3.4%, much less that it would happen so suddenly that the Fed would be unable to keep a lid on inflation via repeated rate increases. Did the NYT quote anyone on the other side? Anyone who thought the Fed is not doing enough? NO.
“If they were to simultaneously lower the rate to zero while leaving $1 trillion in reserves in the banking system, they would have a lot of reason to worry about inflation,” he said.
NYT, you suck!
I e-mailed "professor" Christopher L. House to explain himself, because the NYT really makes him sound like a complete idiot... No response yet.