Fed injecting money against Fed Fund Rate

[naeron]

My Gosh .. see the daily volatility. This is not a healthy sign for a "DEVELOPED MARKET" like US. All eyes are set up against Fed. Fed is not budging aginst the market pressure of the rate cut making inflation as its base for the decision. Consumer sentiment is really depressing at this moment. Home prices are tumbling. The money that was pumped in the markets get soaked up, gave some temporary relief. But again the same turmoil.

I have one query. Lets say this is a hypothetical case :
What will happen to the inflation if the Fed injects a sizeable amount of money in the markets to keep the shops running but not changing the Fed Rate ( or rather increasing it!!!) ? What can be the long term effects of this in case it happens?

Thanks
Nalin Aeron

 

[SteveTownsend]

What will happen to the inflation if the Fed injects a sizeable amount of money in the markets to keep the shops running but not changing the Fed Rate ( or rather increasing it!!!) ? What can be the long term effects of this in case it happens?

Thanks
Nalin Aeron

Artificially increased liquidity fosters asset bubbles. Look at what's happened in real estate prices (and their inflation rate) across the US in the past 3 years purely via the easy availability of cheap mortgage money.

It's hard for me to see how printing money solves this. The US can either take some pretty nasty medicine now, or else have far bigger problems in a few years' time. You cannot fix one asset bubble by inflating another.