Why is there growing inflation risk?
*DBloomberg, by Claudia Carpente, January 19, 2006
Fed Members See Increased Inflation Risk From Energy, Rising Factory Use
“Inflation in the U.S. may be under control; the risk that it will accelerate isn’t, according to two central bankers.
Falling unemployment and busier factories may produce bottlenecks in the economy that threaten to push prices higher, Federal Reserve Governor Susan Bies said yesterday. Richmond Fed Bank President Jeffrey Lacker, speaking the same day, said it’s “too soon” to dismiss the risk from soaring energy prices.
Investors and economists are watching Fed speeches to gauge how many more times the central bank may raise its main interest rate. Bies and Lacker will both vote this year on rate decisions by the Fed’s Open Market Committee, which next meets Jan. 31. Their concerns about inflation suggest rates have further to rise. Two other voters, San Francisco Fed President Janet Yellen and Atlanta Fed President Jack Guynn, speak later today.
‘They like inflation where it is now,” said David Wyss, chief economist at Standard & Poor’s in New York. “But they’re worried that it’s creeping up.”
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