Bernanke May Be Wrong: Next Rate Move Might Be Down

Bernanke May Be Wrong: Next Rate Move Might Be Down

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Sept. 12 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and his fellow policy makers agreed at their August meeting that their next move on interest rates would probably be up. They may turn out to be wrong.

Inflation looks likely to ebb, thanks to falling commodity prices and contained labor costs. The U.S. economy, meanwhile, may be set to take another lurch down as consumer spending gives way and the credit crunch intensifies with the plunge in Lehman Brothers Holdings Inc.'s shares.

``If the consumer balance sheet starts to unwind quickly, you'd get another disinflationary force and then the Fed would be brought back into play with lower rates,'' says Mohammed El- Erian, co-chief executive officer of Pacific Investment Management Co. in Newport Beach, California.

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The Fed makes a rate decision next week...will they surprise with a cut?

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