Is the FED is going too fast! The concept of raising interest rates until the economy SLOWS DOWN is flawed if actual inflation indicators remain denign. I question whether this aggressive stance by the FOMC is appropriate since it appears they are focusing on the stock markets as means of slowing this growth as the "wealth effect" continues to fuel the economy. I believe this debate over interest rates/inflation will heat up over the coming months as the effects of the Fed's action are felt.
Alan Greenspan defended the Federal Reserve's recent interest rate increases today as necessary to keep the current prosperity on track, and denied that he was putting the entire economy at risk just to rein in the bull market.
In an appearance before the Senate Banking Committee, Mr. Greenspan, the central bank chairman, parried questions from members of both parties about whether he was putting too much emphasis on the strains that rising stock prices might be creating in the economy, and too little on the benefits of low unemployment, steady growth and low interest rates.
Elaborating on comments he made last week, Mr. Greenspan said that while he was not aiming at stock prices, he had to be concerned about how the run-up on Wall Street translated into increased consumer spending and a broader increase in demand for goods and services. That "wealth effect," he said, was contributing to an imbalance between demand and the economy's ability to produce the supply needed to meet it, the classic precondition for an outbreak of inflation.
Mr. Greenspan said he saw no evidence of inflation outside of rising oil and commodity prices. But as he did during an appearance before the House Banking Committee last week, he suggested that the Fed would continue raising rates in small steps until the economy slowed from the blistering pace it set late last year
Please sign this petition w/ your comments on this policy! |
