Critics Warn Fed's Plan Bad for Dollar

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The Federal Reserve is considering an unusual way of strengthening the economy -- cutting interest rates even more by letting inflation rise slightly.

This move would mean money would be worth less over time and make it even cheaper, hopefully encouraging businesses and consumers to borrow even more.

Fed members have said they are willing to offer the economy more relief. Buying U.S. government debt would lower interest rates, which the Fed hopes would trigger more economic activity, supporting jobs and inflation. But lower rates mean that assets bought in dollars offer investors lower returns, weighing on the dollar.

But critics warn such a policy would be bad for the dollar, which is already hurting on the international markets.

"Fed policy was supposed to reignite the American economy, but it's not doing that," Joseph Stiglitz, a professor at Columbia University in New York, said in a Bloomberg Television interview on Wednesday. "The flood of liquidity is going abroad and causing problems all over the world."

The International Monetary Fund forecast Wednesday that the U.S. economy will grow just 2.6 percent this year, below its previous estimate of 3.3 percent, and that growth will slow to 2.3 percent in 2011.

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