Fed playing down higher costs

The below post notwithstanding, central bank officials believe that the recent run-up in oil prices will subside and that inflation was not an immediate concern. "The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually," the Fed statement said. From the NYT:

Critics of the Fed's position on inflation argue that higher commodity prices will push up the price of other goods and services. But Mr. Bernanke and his allies consider it more likely that the higher prices will force Americans to reduce consumption, because wages are not rising, and Americans will not have more money to spend. As demand drops, they say, the price of food, oil and other commodities will also fall. Fed officials emphasized that they were concerned about the price of food and oil. But they say that best way to keep those prices stable over the long term is to ignore short-term fluctuations, just as drivers are taught to steer straight by looking down the road.

Fed Chairman Ben Bernanke holds his much-anticipated news conference in about 30 minutes.


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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
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