So far in 2008, little seems to be going right for the U.S. economy or for the Federal Reserve's efforts to keep it on course. In fact, two very important things are going in the wrong direction: inflation and long-term interest rates. The price of oil was expected to level off or decline by now, not soar back to $100 per barrel, and slower growth was supposed to keep a lid on other prices. Instead, inflation in January picked up steam, even outside of energy. More important, while the Fed's January cuts, unprecedented in their size and speed, were supposed to ease borrowing conditions for businesses and home buyers, credit has tightened further.
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