Are we in store for an inflationary recession?
*The Wall Street Journal, by Sudeed Reddy, February 8, 2008
Mounting Inflation Concerns Weigh on the Fed’s Next Move
“Federal Reserve officials are acknowledging increasing weakness in the economy, signaling a willingness to cut rates again at their next meeting. But inflation concerns are rising among some officials, indicating the magnitude of their next move may be a matter of contention.
In speeches this week, policy makers said they are expecting a sharp economic slowdown during the first half as the housing slump, credit crunch and market turmoil take a toll on consumers and businesses.”
“Charles Plosser, president of the Federal Reserve Bank of Philadelphia who also is on the voting rotation this year, suggested this week that he would need to see a deeper deterioration in the economy — beyond the weak numbers already expected — to support further easing.
But Mr. Plosser, who backed the last two rate cuts, said he expects ‘little progress’ in lowering a key inflation measure this year or next, ‘and I am skeptical that slower economic growth will help,’ he said. ‘All you have to do is recall the 1970s when we experienced both high unemployment and high inflation to appreciate that slow economic growth and lower inflation do not necessarily go hand in hand.'”
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