Caught by the tale!

April 30, 2008

 

As reported today in Bloomberg.com

The Federal Reserve lowered the benchmark U.S. interest rate by a quarter point to 2 percent and indicated it’s ready to pause after seven cuts since September.

“The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time,” the Federal Open Market Committee said in a statement after meeting today in Washington. The central bank also warned that “some indicators of inflation expectations have risen in recent months.”

Chairman Ben S. Bernanke and his colleagues dropped a reference to “downside risks” to the economy, while acknowledging the damage that the housing slump has wrought on the six-year expansion. Stocks surrendered gains on speculation the most aggressive monetary-policy easing in two decades is approaching an end.

“We do not expect to see a rate cut at the next few meetings without a substantial contraction of the economy,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We are not yet to Memorial Day weekend, but the Fed effectively told us today to take the summer off.”

Inflation Outlook

Oil prices reached another record high of $119.93 a barrel on April 28. The Fed said indicators of inflation expectations have risen.

“The committee expects inflation to moderate in coming quarters, reflecting the projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization,” the Fed added. “It will be necessary to continue to monitor inflation developments carefully,” the Fed said.

At the same time, the economy is faltering. Hours before the Fed decision, the Commerce Department reported that gross domestic product increased at an annual pace of 0.6 percent last quarter. Spending by households, the biggest part of the economy, grew at the slowest pace since 2001, when the U.S. economy was in a recession.

Our Perspective:

Where is the reality check for middle America?

Now the Fed is worrying about inflation. Food and gas prices have risen sharply! This is making it very difficult for families to keep up.

Where will we find relief?

It is getting more difficult to meet monthly expenses, let alone trying to add to our savings account.

Small and medium size businesses are caught in the crunch.

Should you find yourself dealing with these tighter dollar issues, give us a call. We are working with companies creating opportunities to lower cost. There are still many opportunities to find savings.

Don’t be complaisant! Be Proactive!

We are here to serve. Contact george@hbsadvantage.com

Visit our website www.hutchinsonbusinesssolutions.com to learn about opportunities available to reduce cost and provide savings for your company.

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