Fed Cuts Rates: Short-Term Relief, Long-Term Inflation Risk?

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3790-1.3990

Euro                 1.4860-1.5090

Sterling            1.7890-1.8110

WTI Oil (opening level) $71.28

The situation in Venezuela highlights how extreme inflation can erode not only an economy but also a population's basic well-being. When a government increases the money supply unchecked, the resulting inflation can spiral, raising the cost of essentials like food, healthcare, and housing. This scenario is a cautionary tale for economies like the U.S., where inflation control relies heavily on interest rate adjustments but often overlooks the impact of money supply growth.

The Fed's recent interest rate cuts may bring some short-term relief by encouraging borrowing and investment, but without a balance in money supply management, inflation could rise again. If inflation continues to climb, Americans might feel the same financial strain that Venezuelans faced, albeit on a different scale. The challenge, then, is finding a sustainable approach that prevents inflation from devaluing the dollar and eroding purchasing power. In the end, the lesson from Venezuela serves as a reminder: stimulating an economy without controlling money supply risks pushing inflation into dangerous territory, with consequences that affect everyone’s quality of life.