Fed Finally Admits Rising Inflation, Still Hedges on Rates

Talk of escalating inflationary pressures has been circulating for months now and, in a last-on-in-the-pool type of manner, the Federal Reserve finally admitted such. But it still hasn’t shaken the Fed and Chairman Ben Bernanke’s resolved to keep rates historically low to help foster growth or continue stimulus efforts full speed ahead.

Following the Fed’s latest two-day meeting of the Federal Open Market Committee this week, it was announced that the target for the federal funds rate would remain at the rock bottom range between 0% and 0.25%. The Fed also announced it would continue its in-motion plan to purchase $600 billion in longer-term Treasury securities. Both, however, was expected.

Perhaps unexpected was the Fed’s warming to the idea that many embraced weeks and/or months before: that inflation is creeping into the picture. Granted, its announcement typically downplayed inflation even if no longer ignoring its presence.

“Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued,” the Fed said in a statement. In addition, while hailing continued gradual economic recovery, the Fed also acknowledged that commodities prices, especially those based on crude oil, “have risen significantly.” There is obvious concern, both inside and outside the Fed, of its impact on stymieing the already lackluster economic recovery.

Brian Shappell, NACM staff writer

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