NYT: Rising Inflation Limits the Fed as Growth Lags

[El Pinko]

http://www.nytimes.com/2008/02/21/business/21econ.html?_r=2&ref=business&oref=slogin&oref=slogin


Rising Inflation Limits the Fed as Growth Lags
By EDMUND L. ANDREWS and MICHAEL M. GRYNBAUM
Published: February 21, 2008
WASHINGTON — The Federal Reserve, for all its power, faces tough new limits on its ability to keep the economy out of a recession.

Even though the Fed cut short-term interest rates twice in January, home mortgage rates have edged up steadily in the last few weeks and credit for businesses is as tight as it was when financial markets seized up last August.

On Wednesday, the central bank, led by Ben S. Bernanke, found itself facing hints of a problem that the United States has not seen in decades: stagflation, the mix of slumping growth, sharp spikes in oil and food prices and a rising pace of overall inflation.

The Labor Department reported that consumer prices jumped 4.3 percent in January, compared with one year earlier. That was the biggest jump in more than two years. Even after excluding the volatile prices for food and energy, inflation was up 2.5 percent — well above the central bank’s unofficial target of 1 to 2 percent.

A few hours after the report on consumer prices, Fed officials acknowledged that they had reduced their forecast for growth this year to an anemic pace of 1.3 to 2 percent and that joblessness was likely to climb to 5.3 percent, from 4.9 percent today.




(I wonder if this graphic includes the "volatile" data for food and energy that the government excludes from "core" CPI?)

[El Pinko]

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