Fed talking tough on threat of inflation

Posted: Wednesday, June 25, 2008 6:53 pm
By: AP

WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke (above) and his colleagues are updating Teddy Roosevelt’s admonition to speak softly and carry a big stick. The Fed policymakers are starting to raise their voices while brandishing the stick even though they don’t appear ready to use it. When the Fed concludes a two-day meeting today, it is widely expected that the central bank will express more concerns about inflation and in that way signal that rate increases could be on the way. However, at the same time, private economists are widely in agreement that the Fed will not actually start raising interest rates, given how weak the economy is at the moment. “The Fed is caught between a rock and a hard place,” said Sung Won Sohn, an economics professor at California State University. “The economy seems to be slipping into a recession at the same time that inflation is getting worse.” There was more bad news Tuesday when the Conference Board reported that its gauge of consumer sentiment dropped in June to the lowest reading in 16 years as soaring gas prices, rising unemployment and sinking home values continued to batter Americans. Published in The Messenger 6.25.08