03/28/2008 05:12 am ET Updated May 25, 2011

Fed Rate Cut Could Revive Inflation

The Federal Reserve Board's rate cut yesterday increased the chances that months of Fed moves could start to trickle down to homeowners in time to ease the pain when adjustable-rate mortgages reset this year. And people who borrow money to pay tuition, buy cars or cover unpaid credit card bills might eventually see some benefit.

But the Fed's action could also revive inflation, many economists fear. By reducing the interest rate financial institutions charge each other for short-term loans, the Fed makes money more readily and cheaply available. If it miscalculates, it can pump too much money into the economy, fueling excessive demand for goods, housing and capital spending -- and driving up prices.

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