Ben Bernanke--Determined to Drive a Stake through the Heart of the Dollar
February 27, 2008
Fed Chief Signals He’s Open to More Rate Cuts
WASHINGTON — Having already slashed short-term interest rates by almost half since August, the chairman of the Federal Reserve, Ben S. Bernanke, signaled on Wednesday that more rate cuts — which is to say more cheap money — may lie ahead.
Mr. Bernanke’s assumption is that slowing economic growth will reduce inflationary pressures in the months ahead, because debt-laden consumers will be far more wary of spending money and businesses will be more cautious about investing in more plant and equipment.
But the success or failure of the Fed’s strategy could depend on something outside Mr. Bernanke’s immediate control: foreign confidence in the American dollar and foreign willingness to keep financing the United States’ huge external debt.
The dollar has plunged against most major currencies since the Federal Reserve first began cutting interest rates in September, and slipped to another all-time low against…