The move by the fed to only decrease the short-term lending rate by a quarter point, left uncertainty in the markets and investors, as it underscored the concern that inflation is a growing, major factor in the economy.
With wholesale inflation reaching its largest increase in 34 years, and the Consumer Price Index for November rising by 4.3 percent over November 2006, it puts pressure on the Fed to not drop short-term lending rates. Inflation for the year is at an annual rate of 4.2 percent at this time, not including December. In 2006 inflation was at a 2.5 percent rate.
Of course what this does is create an atmosphere of uncertainty, which makes it more difficult to project, even into the near future.
Even with the promises and actions of central banks to inject money into the global markets, it hasn't convinced a lot of people and institutions that it will be enough to counter the problems.
The biggest concerns for business, is the psychological effect it will have on their customers; whether consumers or other businesses. There's definitely a possibility that it could tighten up spending even more, until a clearer picture emerges. We should have contingenies in place in case this becomes a growing reality, which it probably will.
This could apply just about anywhere in the world at this time, not only the US.
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