Blog: Spirit of Money, Financial Fluidity
by munificent

FOMC still raising

Gee, I'd a thought they could stop raising rates if their aim was to slow inflationary cycle...Katrina slowed that sysle and oil will slow the cycle by adding frieght premiums for every item shipped...I don't understand this...I need to think of the macro implications!

Date:   9/9/2005 3:52:17 AM   ( 16 y ) ... viewed 1454 times

Fed to keep raising rates despite Katrina
Thu Sep 8, 2005 6:38 PM ET
Printer Friendly | Email Article | Reprints | RSS

By Glenn Somerville and Alister Bull

WASHINGTON (Reuters) - A swelling chorus of Federal Reserve policy-makers say the best way to help the U.S. economy heal from Hurricane Katrina is to keep inflation in check -- a sign interest rates will keep rising as planned.

Less than two weeks before a September 20 scheduled meeting of the U.S. central bank's policy-setting Federal Open Market Committee, chances the Fed might pause in its rate-rise cycle in recognition of the storm's impact were diminishing.

"The greatest contribution monetary policy can make is to keep the national economy on an even keel," San Francisco Fed Bank President Janet Yellen told community leaders in San Francisco on Thursday.

"Monetary policy, unfortunately, has little scope to cushion the immediate economic fallout from such a severe and sudden blow to a region," she said.

The Fed has boosted its trend-setting federal funds rate target 10 times since June 2004, in quarter-percentage-point increments, as it aims to reach a "neutral" rate that neither spurs inflation nor slows growth.

That has raised the fed funds rate to 3.5 percent, still relatively low by historical standards.

The key argument for a rate pause would be to counter the potential drag from the hurricane, which wreaked havoc on the Gulf Coast and on vital oil-refining and distribution facilities clustered in the region. But even before Katrina, policy-makers were wary of rising price pressures from costlier imported oil and other sources.

HIGHER RATES

Last week, Philadelphia Fed Bank President Anthony Santomero said it will take considerable time to assess the disruption to oil distribution and production. He also said the hurricane's impact, traumatic as it is regionally, will not derail expansion and policy-makers must beware of rising labor costs and diminishing slack in labor markets.

"To keep these incipient price pressures well-contained, the Fed will have to continue shifting monetary policy from its current, somewhat accommodative stance to a more neutral one," Santomero added.

Speaking to a business group at Temple University, Santomero predicted the economy will grow at a 3.5 percent to 4 percent rate in 2005 and also in 2006 -- a solid pace that likely would continue to take up slack in job markets.

Prices for imported oil -- and for retail energy products like gasoline -- are expected to remain elevated for some time and economists at the Fed and elsewhere still are trying to assess how that will affect consumer spending patterns.

In an interview with Reuters last Friday, Richmond Fed Bank President Jeffrey Lacker said the economy should be able to weather costlier oil because consumers were less uneasy now than in the past about its inflationary impact. In past episodes of costlier oil, notably in the 1970s, consumers feared the Fed would let oil prices pass through to inflation.

"I don't think that is the case now and I think that is why there is reason to believe there will be less pass-through to inflation right now and the dislocation to the real economy will be substantially less," Lacker said.

That would be another reason for the Fed to maintain its guard against the debilitating fear of inflation, by sticking with its course of small, steady interest-rate rises to keep price rises in check.

Chicago Fed Bank President Michael Moskow, a voting member of the FOMC, on Wednesday underlined that his concern remained with curbing inflation, rather than worry about a slowdown.

"I'm concerned about core inflation running at the upper end of the range that I feel is consistent with price stability," Chicago Fed Bank President Michael Moskow said in a speech to a business group on Wednesday.

There is general agreement the pace of growth will lose a step in this year's second half because of the tens of billions of dollars worth of damages from Katrina, but some of that will be regained at a potentially strategic point next year.

Former Fed Governor Laurence Meyer said Katrina would take a chunk out of growth in the second half of 2005, when the economy would otherwise have been very strong, and rotate it into 2006 when growth would have been weakening.

"The big story here is the underlying resilience of the economy, the shifting of growth from this year to next year and the need for monetary policy to remain on an appropriate track," he said.

"You're at the same place by the middle of 2006 than you would otherwise be ... therefore, monetary policy should be about where it would otherwise be," Meyer said.

He didn't rule out a pause in September if the Fed wanted to buy some hurricane risk-insurance. But he warned this could cause communication problems the Fed would need to resolve by making very clear in the accompanying statement that tightening would then resume.



Add This Entry To Your CureZone Favorites!

Print this page
Email this page
DISCLAIMER / WARNING   Alert Webmaster


CureZone Newsletter is distributed in partnership with https://www.netatlantic.com


Contact Us - Advertise - Stats

Copyright 1999 - 2021  curezone.com

0.441 sec, (2)

Back to blog!
 
Add Blog To Favorites!
 
Add This Entry To Favorites!

Comments (20 of 48):
Thanks for your in… kermi… 15 y
I wonder about wom… 9thbo… 15 y
everybody knows... drofin… 15 y
Taiwan/China Next? Rikki-… 15 y
I am sorry to hear… 9thbo… 16 y
Re: I have a retir… #4933… 16 y
Nope, I don't make… 9thbo… 16 y
commercial pitch mark777 16 y
oh well... drofinnah 16 y
Yes this may well … kermi… 16 y
First hand experie… 9thbo… 16 y
Depends on age/ris… 9thbo… 16 y
10% of portfolio i… #1923… 16 y
Hi K-! Hope all i… 9thbo… 16 y
WOW who would thin… kermi… 16 y
LOL! I love Motley… JeSui… 16 y
Perhps, my experie… 9thbo… 16 y
I have a retiremen… oztin 16 y
Re: Sorry Kerme, I… kermi… 16 y
very good, but som… 9thbo… 16 y
All Comments (48)

Blog Entries (12 of 249):
FOMC still raising  16 y
State Dept on Katrina  16 y
Best Article On Gas Prices  16 y
OH NO!X-CFO of Ben & Jerry's  16 y
Insiders Selling Google?  16 y
Economics of Katrina  16 y
Lee; Google & Microsoft  16 y
Pic of Gas Efficient Buggy  16 y
Top 3 Retirement Plans  16 y
250k for Katrina  16 y
1 Million for Katrina  16 y
Cassandra Utterance  16 y
All Entries (249)

Blogs by munificent (10):
Yoga Path  15 y  (396)
Cold Water Blog  15 y  (269)
Quantum Intelligensia  15 y  (267)
Leadership  15 y  (67)
BaBaGee Blog  15 y  (16)
Breathwork  16 y  (16)
Desire  15 y  (5)
Sacred Sex  15 y  (4)
Apothegm  15 y  (3)
Breathwork for wholeness  16 y  (3)

Similar Blogs (10 of 185):
My Unusual Road of …  by kerminator  50 min
Absolute Truth Some…  by Kerminator  16 d
Chef Jemichel ~ The…  by chef jem  70 d
Advices and tips on…  by Law Offices  72 d
Manifestation Magic…  by magic44  4 mon
David Sanderson’ Ul…  by manifestation11  8 mon
Five steps on how t…  by drawmoney7  8 mon
willson 456  by kaviharshu99  10 mon
Mobile Notary  by mobile-notary  14 mon
asinglemomstory  by loknathtechtro  16 mon
All Blogs (1,019)

Back to blog!
 

Your Ad Here
Place your ad here !



Black Walnut Tincture
Hulda Clark Cleanse Kits



Lugol’s Iodine Free S&H
J.Crow’s® Lugol’s Iodine Solution. Restore lost reserves.



Natural, Soothing, Progesterone Oil
Supplementation and Hormone Balancing Based on the...