05 August 2008

FOMC Meeting

Well, the FOMC statement has been released.

"Economic activity expanded in the second quarter..." and "...the inflation outlook remains highly uncertain."

And once again Dallas Fed President Richard W. Fisher voted to increase the target for the federal funds rate (I agree with his action).

This statement is nearly identical to that of the June 25 meeting. However, the Committee did express a "singificant concern" about the upside risks to inflation, something not mentioned in previous statements. Inflation indicators are ticking up ever faster and it seems as though the Fed has lost traction in reagards to the use of the federal funds rate; mortgage rates and interest rates for corporate debt are not being signifcantly affected. So instead of keeping the federal funds rate low and adding to the upside risks to inflation, why not start raising the federal funds rate slowly?

No comments: