Is the Fed less worried about inflation than an economic recession?
*The Wall Street Journal, by Greg Ip, January 4, 2006
Fed Suggests It’s Close to Ending Run of Rate Rises
“Federal Reserve officials are less worried about inflation and thus may raise interest rates just one or two more times in the next few months, minutes of their December meeting suggest.
“The number of additional [rate increases] required probably would not be large,” according to a summary of the Dec. 13 meeting, released yesterday, with the customary three-week lag.
More clearly than the statement issued just after the meeting, the minutes signal that the Fed is nearing the end of a campaign that has raised the target for the federal-funds rate — charged on overnight loans between banks — to 4.25% from a 46-year low of 1% in June 2004, in 13 quarter-percentage-point steps.
The likelihood that the Fed is nearing an end to its tightening was reinforced yesterday by weaker-than-expected economic data. An index of manufacturing activity, based on a survey of factory purchasing managers, slipped in December, and construction spending grew less than expected in November as home-renovation outlays fell. In addition, some economists estimate that consumer spending was flat in the fourth quarter for the first time since 1991.”
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