Inflation Fears Could End Fed's Fiddling

With food and energy prices soaring around the world and the value of the U.S. dollar declining, financial markets are starting to ponder the limits of easy-credit policies from the Federal Reserve.

The specter of global inflation has caused a shift in expectations for the central bank's next decision on interest rates, which will be announced next Wednesday. The futures market was recently pricing in a 96% chance of a 25-basis point cut to the fed funds rate, and a number of economists predict the Fed will halt its series of rate cuts after its April meeting.

"After next week, they're going to be in a wait-and-see mode," says Ryan Sweet, economist with Moody's Economy.com. "More likely than not, they're going to leave the fed funds rate at 2% and see how the economy rebounds in the second half of the year." ...