By Steve Matthews and Margot Habiby
Sept. 4 (Bloomberg) -- Federal Reserve Bank of Dallas President Richard Fisher said there's a 50 percent chance inflation will accelerate even amid slowing economic growth.
The Fed confronts ``even odds'' that ``the inflationary scare we experienced of late infiltrates the mindset of consumers and business operators,'' Fisher said in a speech in Houston. ``The jury is out on whether lesser momentum will be sufficient to translate into relief on the price front.''
2 comments:
So the basic prognosis of the FED is that we may be entering stagflation soon?
The link you provided mentions that the Boston Fed President, Eric Rosengren opposed raising interest rates.
Now I am thinking that if the inflation rate is much higher than the growth rate, the Federal Reserve would impose contractionary monetary policy like raising interest rates.
Then again, if consumers expect interest rates to increase in the future, they would go out and buy all credit now, therefore increasing the price of credit (interest rate).
The Federal Reserve Chairman, Ben Bernanke mentioned in Kansas City earlier this year that interest rates will increase (he did not mention by how much). But I do not think that people bought out a lot of credit because
a) people already have too many loans to pay off and
b) consumer confidence is low right now (due to the recession and uncertainty in Presidential elections) which discourages people to spend and to take out loans anyway.
So I really don't see the need for Rosengren to worry about rising interest rates because people won't be taking out a lot of loans anytime soon. Am I wrong here?
Post a Comment