In the late 70's inflation got out of control, partly because of rising oil prices, and partly because the FED was unwilling to put the country into a deep recession to get inflation under control. When Reagan came into office he let the newly installed FED chairman <a href="http://en.wikipedia.org/wiki/Paul_Volcker">Paul Volcker </a>do what was necessary to curb inflation -- raise interest rates. It was devastating to the economy, but it set the stage for a long-term economic expansion. I still look back on that time in history and the decisions that were made as being very courageous. Reagan and Volcker took a lot of heat, but they did the right thing.
If Ben Bernanke lowers interest rates, he will be restarting the inflationary cycle Paul Volcker worked to end. The pain of ending an inflationary cycle would, IMO, be worse than taking our medicine now. Any lowering of interest rates will be a huge step backward, and Ben Bernanke knows this.
Inflation is not good. We have lived without it for so long that people forget the problems that go along with inflation. Inflation is a tax on everyone, and it is particularly bad for savers. Borrowers think it is a good thing, but banks respond by raising the cost of borrowing, so it is only good for borrowers with long-term fixed rates. People with credit cards, adjustable rate mortgages, etc. will be hosed by high inflation.
IMO, despite calls to the contrary, the FED will raise interest rates starting later this year, and interest rates will continue to rise slowly over the next 2 or 3 years. The party is over, and it is time to pay the piper.