Everyone's favorite group of quasi independent bankers meets today to discuss the probable rate reduction, which would be just another notch in the belt of the Bernanke Fed and its love for the low interest rate.
The Fed believes that inflation is not a worry because the world's economies are so bad, which I also aree in the very short term to be true. If stock markets are losing 70% of their value from last year such as the Shanghai Index, then the loss in wealth tempers inflation concerns because a lot of money is not needed to be printed to cover the new wealth in an economy.
In the long term, however, the story is quite different since there has been an inertia from the last two Fed groups to raise interest rates regardless of inflation. When the markets stabilize and prices run up on commodities again, your dollar will buy much less with a 1% interest rate than a 3% interest rate, etc. Beware the short term fixes for they may hold long term curses.
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