Is the Fed struggling with inflation and recession much like stagflation in the 1970s?
*Bloomberg, by Rich Miller, September 18, 2006
“Federal Reserve Chairman Ben S. Bernanke is stepping up his push for an inflation target at a time when hitting it might damage the U.S. economy.
Bernanke, long a proponent of setting a numerical goal for inflation, has penciled in an in-depth discussion of the Fed’s communications strategy, including targets, for next month’s Federal Open Market Committee meeting. With targeting enthusiast Frederic Mishkin joining the FOMC, Fed-watchers including former Governor Laurence Meyer say the central bank might agree to shift strategy by mid-2007.
A move toward targeting, perhaps starting with regular publication of inflation reports, would answer criticism that Bernanke’s Fed has been blasé about mounting price pressures. The risk is it might also lead central bankers to raise interest rates high enough to push the economy, which they already expect to be weak next year, into a recession.”
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