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Pros Say: Fed Move Will Create a Bond Bubble
CNBC.com | December 17, 2008 | 08:46 AM EST

The dollar dropped to an 11-week low and government bonds rose Wednesday after the Federal Reserve cut its base rate to a range of zero to 0.25 percent. The central bank said it would employ "all available tools" to battle a year-long recession.

The Fed's rate cut and plans to flood the market with liquidity were met with mixed sentiments by experts interviewed by CNBC.

Fed May Risk Forming a Bond Market Bubble

There are some severe dangers in the Fed's new course of action, says Uwe Parpart, chief economist & strategist, Asia at Cantor Fitzgerald. He tells CNBC it could undermine the value of the dollar and create a bond market bubble.

Fed's Move is Beneficial for Financials

The Fed's move to buy asset-backed securities will bode well for the financial sector, say Donald Straszheim, managing principal at Straszheim Global Advisor and Bill Smith, president & senior portfolio manager at SAM Advisors.

Fed Creating Inflation Problem

“What they are doing is highly inflationary … for the short term it is appropriate, but for the long term they’ve got anther issue that they’ll have to deal with another day,” Jim Bianco, president at Bianco Research, told CNBC.

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