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U.S. Fed officials offer divergent views on inflation risks
Federal Reserve officials offered divergent opinions on Monday about the correct stance for monetary policy, pitting a hawk against a dove over the inflation risk posed by the central bank's massive efforts to buoy U.S. growth.
The Fed, which meets to review policy next week, in September announced a third round of quantitative easing and pledged to keep interest rates near zero until mid-2015 in an effort to underwrite a durable economic upswing.
Anti-inflation hawks were outnumbered by the doves on the Fed's policy-setting committee, who view inflation as a distant threat in the face of tepid U.S. growth and high levels of joblessness, plus other gauges of economic slack.That's really quite interesting. The top bankers in the U.S. are telling us that things are so bad that the risk of an economic death spiral is of more concern than the risk of an economic falling-off-the-debt-cliff... at least that's how I read these tea leaves.
Lacker said the Fed's guidance that it will keep rates low until at least mid-2015 could send the wrong message.
"It could be misinterpreted as meaning that the Committee believes the economy will be weaker than people had thought. By itself, that could have a dampening effect on current activity, which is not what was intended," he said.Misinterpreted? Hmmm. How's that?
St. Louis Fed chief James Bullard raised his next year growth estimate to 3.5 percent, from a previous call of a pace above 3 percent. He told the Missouri Council on Economic Education that he saw unemployment dropping toward 7 percent over the course of the year, the St. Louis Fed said.
But U.S. growth has repeatedly undershot forecasts as it has gradually recovered from a severe recession in 2007-2009, and Dudley cited this experience for a reason why policy "needed to be still more aggressive," as well as to guard against shocks. [Full Article]Got it! They have no idea what is going to happen... but it won't be good if we keep doing what we've been doing.