The Fed has reduced its expectations for the US economy in 2008:

FOMC members predicted growth could slow next year to as low as 1.8 percent, according to the middle range of forecasts. The numbers are “notably below'' the 2.5 percent to 2.75 percent anticipated in June, the Fed said. Inflation, as measured by the personal consumption expenditures price index excluding food and energy, will be 1.7 percent to 1.9 percent, down from 1.75 percent to 2 percent. “Most participants judged that the uncertainty attending their October projections for real gross domestic product growth was above typical levels seen in the past,'' the Fed said. “In contrast, the uncertainty attached to participants' inflation projections was generally viewed as being broadly in line with past experience.''

In other words, they are more worried about a recession than inflation at this point.