Two - You are exactly right. The question is whether the Fed will fight inflation OR a depression. They will fight the one they fear the most. The other battle will of course be lost because they cannot fight both. I think they will fight off a depression by lowering rates. The dollar is headed for .40 against the Euro. Oil is headed for well over $100. The dollar plummeted with both rate cuts so far. The Fed is between a rock and a hard place. This was not a problem they faced at the top in 2000 or the bottom in 2002. At those times the choice was an easy one.
I think they are possibly politically motivated, and don't want to give the Dems (i.e. Hillary) yet another major issue (i.e. a raging recession) to run against. Unfortunately, I think they will fail.
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