The danger of keeping rates at zero

The danger of keeping rates at zero
The Fed seems to think inflation is no longer a problem. But inflation may just be in hibernation and low rates for a long period of time could awaken the beast.


NEW YORK (CNNMoney.com) -- This is obviously a terrible time for the economy. For that reason, it made sense for the Federal Reserve to slash interest rates near zero last month.
But I'm starting to worry a bit that the Federal Reserve is willing to leave rates this low for too long and that this could spark inflation down the road.
In a speech in London Tuesday morning, Federal Reserve chairman Ben Bernanke defended the Fed's series of rate cuts since September 2007, saying that inflation was no longer a major concern. The Fed usually raises interest rates when it is worried about inflation.
"At this point, with global economic activity weak and commodity prices at low levels, we see little risk of inflation in the near term; indeed, we expect inflation to continue to moderate," he said. Read article...