"The rationale is that getting inflation up even temporarily would push "real" interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more."
"Others warn that pushing inflation higher than the target could create public confusion and risk fueling financial bubbles and market instability. They say Fed policy already is weakening the dollar and as a result prompting a gold and commodity boom. "The Fed is treading upon a mine-laden path that has never been tip-toed through in this country," said Andrew Busch, a currency strategist at BMO Capital Markets
So is it time to start spending to beat the expected interest rate?
The question is that who will start to spend big first, and with the eminent fear that this economy is recovering so slowly, consumers are extremely hesitant to spend, especially those in the lower bracket. Would you like to be among the first to spend big then?
ReplyDeleteI agree with Hung. I also agree with the author's note at the end of the article regarding the public's perception of the Fed. The Fed continue to announce fixes and nothing seems to change. That is not helping the public's perception. It is starting to seem that the Fed is running out of ideas and that's not a good way for people to feel. If in the summer Bernanke says inflation is not a good idea and now he says it is, that just supports the negative opinion people have of the Fed's decisions. We aren't going to make any strides if we can't improve the public's confidence.
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