Searching questions as Fed printing fuels inflation rather than growth

WASHINGTON, March 7, 2008 (AFP) – As more signs point to a US economy that is sinking fast, the Federal Reserve is struggling to find ways to reignite growth even as confidence wanes among consumers, businesses and banks, analysts say. “Perhaps the ultimate resolution to the problem might have to come from some governmental action not unlike what was done in the early 1990s with the formation of the Resolution Trust that was aimed at solving the savings and loan problems — many of which were very similar to today’s major issues,” he said. As the Fed unveiled a series of efforts to get credit flowing after stunningly weak labor data, some analysts said the central bank’s efforts may have little positive impact and threaten to erode its inflation-fighting credentials.

Recession fears were stoked by Friday’s report that the US economy lost 63,000 jobs in February in a second month of declining employment.

The weaker-than-expected report boosted the odds of another cut in interest rates by the Fed, which has already slashed in federal funds target from 5.25 percent in September to 3.0 percent.

The Labor Department report was released minutes after the Fed announced actions to pump more liquidity into the distressed banking sy