Bernanke cuts rates again.

The Federal Reserve cuts rates today to help ease the housing slump, but at what cost, as I stated in previous post it might not be the best thing to cut rates, becuase with inflation looming. The US dollar is at an all time low with against the major currencies, and the price of oil being at an all time all.

According to the Wall Street Journal, "The decision, following a half-point cut six weeks ago, shows Fed Chairman Ben Bernanke is grappling with risks on two fronts: Plunging home construction and eroding real-estate values could hit the broader economy, while rising oil and commodity prices, combined with a falling dollar, could spoil the Fed's hopes to contain inflation".

In his speech Bernanke seems to think that the housing slump will be a drag on the economy in 2008. We know from Economics 101 that lowering the interest rates usually leads to prices of goods, but if people have more money to spend demand for these goods will go up and the prices of these goods along with it.

The street saw stocks soaring after the Fed Chaiman announced the quarter point rate cut. The Dow Jones Industrial Average closed up 137.54 ending its day at 13 930.01, The S&P 500 ended its day up 42.41 to close at 2859.12, and the Nasdaq closed up 18.36 to end its day at 1549.38.

The FED will meet again to discuss wether or not they will cut or increase interest rates on December 11th, 2007, this will also be their last meeting of the year.