Parsing the Fed

The WSJ:

The Sept. 20 statement announced that the Fed was raising its key short-term interest rate by one-quarter point to 3.75%, its 11th straight increase, despite uncertainty about the economic impact of Hurricane Katrina. The storm hurt near-term economic growth, which normally would call for lower interest rates. But it also has elevated inflationary pressure, which normally would call for higher rates.

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Infofedparse0509

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Source:
PARSING THE FED
Weathering the Storm
WSJ, September 20, 2005
http://online.wsj.com/documents/info-fedparse0509.html

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  1. Larry Nusbaum, Scottsdale commented on Sep 21

    “But it also has elevated inflationary pressure, which normally would call for higher rates.”

    No fair! I claim foul! Why does he get to count food and energy and we don’t? NO FAIR! *wa wa*

  2. Chad K commented on Sep 21

    So it begs the question… is helping the economy get through a rough patch more important than slowing inflation?

    I wonder if they have any stats on how much more pain inflation would cause if the rate increase was postponed ’til their next meeting versus How much pain will an economic downturn cost in earnings, gdp, overall national prosperity.

    People with jobs might say inflation is more important to keep in check, while people looking for jobs would say economic growth is… and I personally don’t know what the right answer is…

    any hints?

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