WORLD> America
|
WORLD> America
|
|
Fed talking tough on the threat of inflation
(Agencies)
Updated: 2008-06-25 16:06 Other analysts, however, said it might have been Bernanke's intent to send out a strong anti-inflation warning, especially since it was coupled with a comment in an earlier speech about the Fed chief's concerns that the weak dollar was adding to US inflation problems. The remarks taken together had the impact of bolstering the dollar, which had been tumbling. Bernanke was assisted in his efforts to talk up the value of the dollar by President Bush and Treasury Secretary Henry Paulson as the administration has grown worried that the dollar's weakness has contributed to the big jump in oil prices, which are priced in dollars. Some economists saw the comments by Bernanke and his colleagues as an effort to convince the markets that the central bank is serious about fighting inflation without having to start raising interest rates at a time when the economy remains very weak. "It is a tricky thing that the Fed is trying to pull off here, trying to keep rates low enough to help the economy while not igniting rising inflation expectations," said Mark Zandi, chief economist at Moody's Economy.com. The last thing the central bank wants is a repeat of the 1970s, when successive oil price shocks did trigger a wage-price spiral that sent inflation soaring and was only subdued when the Fed under Paul Volcker pushed interest rates to levels not seen since the Civil War. "In the 1970s, the Fed allowed inflation expectations to get out of control. The central bank does not want that to happen again," said David Jones, head of DMJ Advisors, a Denver-based consulting firm. |
