What will The Fed do next for the economy?

The Department of Labor announced this morning that consumer prices fell in November by the largest percentage, 1.7%, in the 61 years that records have been kept, much of the decline being attributed to energy prices that have plunged drastically.

With inflation being rather minimal at this point (according to an AP story, the 1.7% decline in consumer prices was larger than economist’s forecast of a 1.2% drop) there is some good news on the financial horizon because, with inflation being rather low, the Federal Reserve has a lot of leverage and can pump money into the economy because they don’t have to worry (yet?) about fueling inflation. And that’s exactly what they’re doing; having the central bank print more money and then pumping it back into the economy, much like Japan did years ago successfully.

All of this is a more complex way to say that the Fed will probably reduce federal funds rate 50 basis points to 1/2% in the next few days.