Nervous Fed Cuts Interest Rates

Nervous about the possibility of a recession, the Federal Reserve has just cut short-term interest rates (the federal funds rate). But how much good, if any, that will do is unclear. Past rate cuts by the Fed have been widely blamed for creating the very real estate bubble that now threatens to lead to a recession. Moreover, cutting interest rates to encourage consumption may aggravate low savings rates that are not sustainable over the long term.