Thursday, April 7, 2011

The Savvy and the Clueless at the Fed

Federal Reserve Bank President Jeffrey Lacker told reporters after a speech today that inflation risks have risen in the last six months, potentially warranting some form of monetary tightening before the end of the year.

"Rate hikes by year end are certainly a possible outcome given what we see with momentum in economic growth and given how inflation risks seem to have evolved," Lacker said, according to Reuters.

What's going on is that the price inflation tsunami that is about to hit is getting a little to obvious for the savvy to ignore. On the other hand, some still don't have a clue.

Cleveland Fed Bank President Sandra Pianalto, speaking in Rome, said the Fed should keep its federal funds target rate very low for a long while to come, and complete its $600 billion bond purchase program as scheduled.

Pianalto said she saw no evidence that sharp rises in food and energy prices would lead to lasting inflation, though the Fed is watching for any signs of an unanticipated spillover.

"My outlook for economic growth and inflation assumes that we complete our asset purchase program as originally scheduled, and keep our federal funds rate target at exceptionally low levels for an extended period," Pianalto said, also according to Reuters.

"I don't expect recent rises in food and energy prices to cause a broad spillover into a wide array of consumer prices, or in other words a lasting increase in inflation," said Pianalto. She said underlying inflation would rise only gradually toward 2 percent by 2013.

Amazing, these will be good quotes to bury her with, later this year.


  1. These Fed people simply can't help themselves. Again with the 'sure food and gas are expensive, but look how cheap computers are' line. These people don't have sense enough to come in out of the rain.

  2. Does she realise that food/energy prices don't cause inflation, but rather are in part themselves caused by monetary inflation? I guess not. About as zany as the Argentine's central bankster.