Thursday, January 31, 2008

Pathetic Fed Forecasts

In the FOMC statement accompaning yesterday's 50 basis point cut of the Fed Funds rate from 3.5% to 3%, the Fed stated that "The Committee expects inflation to moderate in coming quarters".

But as the Wall Street Journal's editorial page points out, they used a nearly identical phrase in the statement accompaning the meeting in January 2007, where they claimed that "inflation pressures seem likely to moderate over time". What have actually happened since then is that inflation, far from moderating, have risen sharply. These forecasts are as pathetic as their claim that they want a strong dollar, and similarly reflects a desire to fool people into buying government bonds, as well as justifying their own interest rate cuts (or in the case of last year, refusal to raise interest rates).


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