Wednesday, May 18, 2011

Fed sees 'transitory' higher inflation: minutes

Fed chairman Ben Bernanke
© AFP/Getty Images/File Alex Wong
AFP

WASHINGTON (AFP) - The US Federal Reserve still views higher inflation as only temporary as the economy muddles through a weak recovery from recession, the central bank reported Wednesday.

According to the minutes of the April 26-27 meeting of the policy-setting Federal Open Market Committee, the participants "generally anticipated that the higher level of overall inflation would be transitory."

While there had been "significant increases" in energy and other commodity prices that had boosted overall inflation, FOMC members expected price increases would ease once commodity prices stabilized.

The central bank, whose dual mandate is to fight inflation and unemployment, said that policymakers "agreed that longer-term inflation expectations had remained stable."


The Fed's view of inflation is crucial. A view that inflation was a rising threat could be seen as a signal that the Fed might soon increase interest rates.

Fed chairman Ben Bernanke had characterized the spike in inflation as "transitory" for the first time in early April and has repeated that description ever since.

But the term has drawn flak in the US media, which is packed with reports on Americans worried about the economy and their own futures, rising gasoline prices, high unemployment and a housing crisis.

According to the FOMC meeting's minutes, participants based their inflation outlook in part "on a projected leveling-off of commodity prices and the belief that longer-run inflation expectations would remain stable."

Citing the subdued risk of inflation and a moderate, but slowing, economic recovery, the FOMC said it would maintain its ultra-low interest rate -- zero to 0.25 percent -- for an extended period and complete a $600 billion bond purchasing program in June as planned.

However, the FOMC raised its inflation rate estimate for 2011, to a range between 2.1 percent and 2.8 percent.

© AFP -- Published at Activist Post with license



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1 comment:

Anonymous said...

>>>Fed chairman Ben Bernanke had characterized the spike in inflation as "transitory"

Yeah, says the guy who claimed the economy was stable at the beginning of 2008, and that the pathway to sustainable growth was in the near future. You better be ready America. $20 loaves of bread, $25 cups of coffee at starbucks, empty store shelves, a shattered infrastructure, and an economic collapse unlike anything we have ever seen in the history of this nation are around the corner. Get out of the dollar NOW. Bernanke is not only the iceberg that is sinking the titanic, but he is also trying to poke holes in the lifeboats. We're in big trouble.

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