Forthcoming Federal Open Market Committee meetings on September 21, November 10, and December 14...
Given apparent productivity and income trends, I can't see an interest rate increase on September 21: the gap between actual and potential output widened in the second quarter, and that's not an environment in which you want to raise interest rates (unless you see an inflationary spiral taking hold, which I don't. Everything except oil prices--the widening output gap, the disappointing employment situation, and the desire not to make extra political waves--seems on the side of quiescence.
I find my view stronger after reading Larry Meyer's A Term at the Fed: An Insider's View, but there is nothing in the book I can really point to...
Posted by DeLong at August 16, 2004 08:17 PM | TrackBack | | Other weblogs commenting on this postAn inflationary spiral? Or a disinflationary spiral?
Posted by: kharris on August 17, 2004 05:19 AMAnd if crude crests $50/bl? How can we contain spiralling energy costs so they don't contaminate the stable (looking) CPI? Are the shoppers expected to peddle to the malls? Are the manufacturers ( OK, distributors) expected to get their goods to market by magic?
The hope is that China's demand for oil eases up (Or that Shell announces a new field in Texas[they can always issue a retraction later] ) and crude gets back to $28/bl. Might as well hope for a strike on Mars, no?
Escalating energy costs are the reification of currency debasement, no? Not exactly an inflationary spiral.
But fear not, the WH line is that increasing the rate is an indication of the economy's strength not weakness.
So Greenspan need not worry that he might be repeating his Bush I folly.
This time it's different.
Looks like currency debasement to me rather than inflation led by increasing energy costs. And under-nourished consumers running out of tax deferments and anemic-looking house appraisals to fund their shopping sprees.
But fear not. According to the WH, increasing the rate is an indication of the strength of the economy --not any weakness.
Someone should tell Greenspan that he doesn't have to worry about being charged with repeating his Bush I folly.
So Roach with his 2-3% hike, had the macho approach and Greenspan with his 25bp nibbles, the wimpy.
"An inflationary spiral? Or a disinflationary spiral?"
Disinflation still seems with us and I find no current reason the 10 year treasury rate will begin a climb to the 7% norm of the 90s.
Posted by: anne on August 17, 2004 08:52 AMThen there is the PPI-
http://www.bls.gov/opub/ted/2004/aug/wk3/art01.htm
What is Bush to do if rates go up? Not reappoint him?
Posted by: bakho on August 17, 2004 06:44 PM