Fed’s rate-cutting days may be over — for now

In addition to its aggressive rate cuts, the Fed has showered the markets with cash. In November, the central bank pumped $48 billion in temporary reserves into the banking system in its biggest combined daily injection of cash funds since the 9/11 attacks. In March the Fed said it was adding another $200 billion into the banking system.

The Bank of England and European Central Bank have made similar cash infusions to shore up the global financial system.

Despite these moves, commercial and investment banks are still nervous about lending to their counterparts because of concerns that one of them may be the next Bear Stearns, the Wall Street brokerage that was forced into a shotgun marriage with JP Morgan after it nearly collapsed under the weight of its bad loans.

Lower rates also have done little to revive the housing market, which remains mired in one of the most severe downturns in history. Mortgage issuers have responded to their former easy-money ways by dramatically tightening lending standards.

A weakening job market — some 300,000 jobs have been lost in four months — has taken some buyers out of the market and given others second thoughts. Gloomy consumer sentiment —which fell last month to the lowest levels in 26 years — continues to dampen home sales in what is typically the industry's strongest season. For a second year, it looks like spring will have come and gone without any signs of life for housing market.

The Fed has another strong reason to signal that it wants to take a breather from cutting rates — it may soon have to start raising them again. Lower rates and easy money help drive inflation — at the very moment the Fed is also hoping to contain it.

The gamble is that a slowing economy will reduce demand, taking pressure off prices. But the forces driving up oil prices include strong demand from a still-growing global economy and tight supplies brought by limits in surplus production. The Fed is powerless to reverse those forces.

And the full impact of the recent run-up in food and energy prices may take months to work through the system. The longer the Fed waits before tightening credit and raising rates, the bigger the risk that inflation will become more deeply embedded in the U.S. economy —and more difficult to fight.

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