The US economy is a seriously ill patient and needs more Fed medicine.

This is the latest from Fed policy-maker Dennis Lockhart, president of the Atlanta Fed, according to a report by Reuters.

“It’s clear the economy is in a slowdown that resembles past periods that were the leading edge of a recession,” Lockhart said at a Rotary Club meeting in Chattanooga, Tennessee.

The feds are gearing up to pump another $75 billion into the credit markets, reports Reuters.

The Fed was ready to exchange billions in low-risk U.S. government bonds for underperforming mortgage investments from primary dealers as part of steps announced this month to help them raise capital and to encourage broader lending.

The dollar has finally started to make a comeback, creeping up in yesterday’s trade against major currencies.

Meanwhile, a sharp sell off in commodities sent the Canadian dollar tumbling. The greenback climbed to 1.0102 Canadian dollars, up from 99.21 Canadian cents the previous day.

More Fed cuts are on the way, judging by Fed funds futures.

Fed funds futures price in an 88% chance that the feds will cut rates by another half point in April to 1.75%.

Based on futures trading in Chicago, investor bets had implied a 100% chance of a cut of one percentage point prior to yesterday’s move by Bernanke & Co.

“Behind cheaper credit, inflation fears loom,” says the The Washington Post.

The Fed’s action could … revive inflation, many economists fear. By reducing the interest rate financial institutions charge each other for short-term loans, the Fed makes money more readily and cheaply available. If it miscalculates, it can pump too much money into the economy, fueling excessive demand for goods, housing and capital spending — and driving up prices.

After yesterday’s Fed-inspired rally US futures pointed down this morning, signaling that Wall Street is by no means out of the woods yet.

S&P 500 futures shed 9.5 points to 1,324.50 and Nasdaq 100 futures fell 14 points to 1,757.00. Dow industrials dropped 93 points.

Yesterday, amid a dramatic day’s trading, the Dow industrials soared 420 points, while the broader S&P 500 added 54 points

It’s Groundhog Day on Wall Street: The Fed has cut interest rates for the fifth time since last September.

This time, the Fed cut rates by three-quarters of a percentage, a smaller reduction than many investors expected.

The Fed funds rate is now at 2.25%, three percentage points lower than its mid-September level.

Financial stocks soared today on the back of better-than-expected earnings reports from Lehman Brothers and Goldman Sachs and widespread anticipation of further rate cuts from the Fed.

The New York Times reports that some investors are expecting “the steepest cut in a generation” to come later today.

While the Fed scrambles to ‘rescue’ Wall Street from its own mistakes, the dollar continues to tumble as investors predict more rate cuts in the US.

Today marked was the fifth day that the US currency fell against the euro.

The dollar dropped to $1.5821 per euro at 7:17 a.m. in New York, according to Bloomberg. Yesterday, it was at reached $1.5903 versus the euro, the weakest level since the euro started trading in 1999.

The New York Times asks one very pertinent question this morning: How many billions in taxpayers’ money will it take to shield Wall Street from ruin?

So far, the feds have stumped up $430 billion in taxpayers’ money to ‘rescue’ Wall Street firms from their own bad investment decisions.

Meanwhile, the Fed’s slashing of rates to try to inject liquidity into the banking system has seen the dollar plunge to record lows against other major currencies.