Friday, March 25, 2011

Wow, Fed's Plosser Says Monetary Policy Causes Inflation

Federal Reserve Bank of Philadelphia President Charles Plosser said:
What creates inflation is monetary policy at the end of the day.
Well, he has that right. Plosser was responding to audience questions in New York at an event held by the Shadow Open Market Committee and e21.

This year, Plosser is a voting member of the Federal Open Market Committee, but didn't vote at the last FOMC meeting against the Fed continuing QE2.

Despite his contention that the Fed creates inflation, and that oil prices, food prices are climbing( and that clothing prices are not far behind), Plosser told reporters:
I don’t think that [inflation]is necessarily imminent, but we have to be very careful we don’t get behind the curve.
One wonders what would be behind the curve in Plosser's view since in addition to oil, food and clothing, gold is near record territory as is silver, and stock market prices continue to climb. The price of what product is Plosser actually watching that would clue him in that price inflation at the consumer level is here?