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Bernanke calmer on inflation threatIsn't that amazing? Oil prices declining and inflation moderating... without the Fed stepping in and raising interest rates to 10%. Back in 1980 when faced with a similar situation... oil driven inflation..., the Fed simply raised rates over 10%... and totally quashed the economy.
By Krishna Guha in Jackson Hole, Wyoming
Published: August 22 2008 15:14 | Last updated: August 22 2008 23:46
The decline in oil prices and the rally in the dollar was “encouraging”, Ben Bernanke said on Friday, suggesting the Federal Reserve thinks global inflationary pressures could be starting to ease.
Speaking at the start of the Federal Reserve’s annual retreat in Jackson Hole, Wyoming, Mr Bernanke said the shift in currency and oil prices, as well as weak growth, “should lead inflation to moderate this year and next”.
This time it decided that wiping out the economy might be worse than temporary inflation. And guess what? Market economics seems to be working.