It has been some time since anyone at the Fed seriously discussed the dangers of inflation. Today, Plosser gave a talk. However, he is still talking interest rate cuts. Meanwhile, inflation is raging.
Reuters - The risks of higher inflation in the face of slower economic growth will pose a challenge for monetary policy this year, Federal Reserve Bank of Philadelphia President Charles Plosser said on Tuesday. Monetary policy today can do little to change a period of below-trend growth expected in the first half of 2008, Plosser told the Main Line Chamber of Commerce in a speech.
Still, "there are risks to the downside of even weaker economic growth." If such weakness is prolonged that "may require further adjustments to policy," he said, hinting at the possibility of further cuts in benchmark interest rates.
"At the same time we also face risks of higher inflation," he said, and the Fed must remain "vigilant" on inflation and "be prepared to act as necessary."
