April 5, 2010
The Federal Reserve can’t make up its mind what the problem is. Specifically, it can’t agree on whether to fight inflation or deflation. So don’t expect any violent moves anytime soon.
The presidents of the New York and San Francisco regional Fed banks, William Dudley and Janet Yellen, see the abating inflation rate as convincing evidence the economy still is burdened by excess capacity and needs to be sustained by the Fed.
Others, led by Philadelphia Fed President Charles Plosser, argue that current inflation measures are distorted by an epic decline in housing costs and could mask a buildup of inflationary pressures.
Evidence to support the latter view? Excluding shelter, inflation is up 3.5% year over year, in large part due to rising energy costs. Excluding housing, energy, and food, it’s up a still-high 2.6%.
This article was posted: Monday, April 5, 2010 at 10:10 am