Ben Bernake defended the FED's move for its new 600 billion dollar program to help boost the economy. The market response however, was not particularly positive as markets remained relatively unchanged as they closed on Friday. Worries of inflation are particularly high and investors fear that more injected money into the system will cause artificial prices in the markets especially in commodities. The FED is buying 600 billion dollars in government funds in order to help encourage lending and spending by consumers.
"The economy hasn't been growing fast enough to reduce unemployment, which has been stuck at a high of 9.6 percent for three straight months. The Fed worries that high unemployment, lackluster wage gains and still-weak home values will weigh on consumer spending, a major drive of overall economic activity"
Do you think the FED's reasons are just? Would you expect inflation to increase to higher than ever levels?
1 comment:
I don't think inflation will increase to a high level, at least in the near future. The economy is still relatively weak; people are still hesitant to consume. It will take a while for the new quantitative easing action to start having some impact. So, it is more about the fear of deflation rather than inflation at the moment.
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