Inflation or not?

Fed left rate unchanged for a few month. This wait-and-look attitude is quite different to previous sharp rate cut. The bet is high prices from oil, commodity could be mitigated in the coming month. Of course, a rate hike could deteriorate the supposed-to-be-back credit crunch and housing market. This is a hard call.

Does the current situation result from previous rate cuts? It probably means Fed had gone too far. Easy credit provides abundant ammunition for speculators in commodity and oil market so that they could drive up prices. On the other hand, rate cut effects on credit market needs time to ripple through. This vacumm period is proved to be painful for Fed.

Higher prices definintely define inflation is coming. Also considering layoff and wage staggnant, there is no much room for Fed on the next move. If they raise rate in a few month while the housing market doesn't seem recovered, then slowdown will be unavoidable. Apprantely, there is no reason to go down or remain.

So Fed is stuck.