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(an email exchange)

On Thu, Jun 12, 2008 at 7:21 PM, Russell wrote:

> The mainstream economists now saying inflation is here to stay. Wow.

Yes, and note this:

Get used to high prices

by Chris Isidore

(CNNMoney.com)But most economists don’t expect the Fed to raise interest rates — its traditional way of combating inflation — until the end of the year at the earliest.

Generally, higher rates cool U.S. economic activity and cut demand for goods and services, which in turn leads to lower prices.

However, the Fed also has a mandate to foster sustainable economic growth. And with the unemployment rate registering its biggest spike in 22 years in May, the Fed is not likely to push rates higher soon, economists said.

They are missing the Fed’s core belief that enables them to meet their dual mandate, that Fisher and others have been repeating:

Low inflation is a necessary condition for optimal growth and employment.

Without that fundamental belief, there is no way to meet both conditions of the dual mandate.

With it, they know, or should know, exactly what to do.


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