When Federal Reserve Bank presidents speak, the markets listen. Philly Fed CEO Charles I. Plosser spoke to the rotary club in his hometown of Birmingham, Ala., and sounded the inflation alarm once again.
"Ignoring price stability during times of economic weakness risks undermining our ability to achieve economic growth over the long run," he said.
"We cannot be confident that a slow-growing economy in early 2008 will by itself reduce inflation."
So while Plosser did vote with the majority of member on the Federal Open Market Committee to cut the federal funds rate by 125 basis points over the last two weeks, Wednesday's speech clearly outlines his concerns about inflation bubbling up in the U.S. economy.
Comments (1)
The trusting U.S. banks grossly overestimated the average Americans ability to pay back their mortgages. Now, we have a situation where the U.S. has amassed a huge debt, and the weakening dollar should lessen the current deficit. However, worldwide inflation has been affected because the dollar is used as an economic benchmark. Many countries are trying to tie their currency to the dollar, in hopes of reducing future inflation. The Czech Republic has a goal of 2% inflation by 2010. However, most analysts predict inflation to be closer to 5%. Prague which is the gateway for European commerce, is awaiting adoption of the Euro. Until the country stabilizes inflation, adopting the Euro will be impossible. I think that US inflation is inevitable and will help restore balance within the world economy. The American economy made a large mistake and sooner or later it will have to pay for it.
Posted by Adam Paris | February 8, 2008 3:54 AM
Posted on February 8, 2008 03:54