Federal Reserve officials fret about inflation
By Tom Stundza -- Purchasing, 4/11/2007 1:44:00 PM
Top U.S. Federal Reserve policy-makers said Tuesday that inflation is too high and the central bank may need to act if it remains so, but they still expect prices to ease gradually as the economy slows. Still, Federal Reserve Board Governor Frederic Mishkin believes that U.S. inflation remained too high and warned if it failed to decline as expected, this would warrant action by the central bank.
The Fed has held benchmark borrowing costs steady at 5.25% since last June after 17 consecutive quarter percentage-point rises. Fed officials have stressed that core inflation, which has edged up to an annual rate of 2.4% according to a personal spending index favored by the central bank, remains higher than they want but should moderate in a sluggish economy. “The current rate of inflation is certainly higher than I would like to see. The view is that there is likelihood, in fact, that we will have moderation in inflation,” Mishkin said on Tuesday.
Meanwhile, Philadelphia Federal Reserve President Charles Plosser says inflation was becoming more difficult to predict and that was making monetary policy more challenging—noting that the U.S. economy is not as strong as the Fed had expected two months ago and prices remained higher.
Plosser has previously said that inflation remained uncomfortably high and the Fed needed to be vigilant. Plosser argued in his speech Tuesday that sticking to a clear policy goal would help keep inflation expectations in check and give policy-makers greater leeway to buffer the economy from shocks.
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