The Fed pushes down the Federal funds rate by buying securities with high powered money which increases bank reserves. Increasing bank reserves allow banks to compete for more deposits that will fund more loans.
More loans mean more business, more economic activity, more demand for goods and services, and potentially more rapidly rising prices (i.e., inflation.)
More inflation penalizes saving and investment, encourages unproductive activities, and capriciously reallocates wealth.
Eventually the Fed will have to rein in the money supply to reduce inflation which will mean real pain.
The bond market voted with its feet yesterday: long term bond yields rose in response to the rate cut and bond prices fell. Bond investors were expecting more inflation.
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