Forex Blog: Currency Trading News & Analysis.

March 1st 2005

Federal Reserve sets inflation target

Members of the Federal Reserve today warned of increasing inflation, which could ultimately lead to higher interest rates.  They cited such causes as rising oil prices and increased demand for American products, due in part to a weaker dollar.  Wages and employment, however, are not keeping pace with price increases in other areas, which may help to keep inflation in check.  However, most economists forecast above average growth this year, as well as increased employment and productivity.  They note that as productivity returns to normal levels, it wil exert upward pressure on wages, and thus inflation.  Inflation is a core consideration of the Federal Reserve when it guides interest rates. reports:

When productivity grows at a faster rate, the economy can grow faster — resulting in higher incomes and producing more goods and services for all of us to enjoy — without generating inflationary pressures.  This ultimately makes our job at the Federal Reserve easier, because our mandate is to set monetary policy to support maximum sustainable economic growth and price stability.

Read More: Fed presidents stress vigilance on inflation

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Posted by Adam Kritzer | in Central Banks | No Comments »

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