FED Paralysis?
According to MoneyNews.com as reported by the New Max network,
The Federal Reserve left its target Fed funds rate unchanged at 5.25 percent for the 8th straight meeting. The latest meeting happens to mark a whole year since the Fed last adjusted rates.
This puzzling inaction over the last year has come even though inflation has been rising and the overall economy dipping a bit. And it’s looking increased assured that Bernanke & Co.’s inaction may very well lead to a bout of stagflation, which of course is a mixture of increased inflation and recession.
It is not a pretty mixture, unfortunately. On the whole, inflation has been consistently growing since October of 2006, unfortunately.
Furthermore, News Max reported, GDP has slowed down over the last year to a rate of only 0.7 percent in the first quarter of 2007. Ouch, that really hurts.
The Fed is holding out hopes that inflation will begin to slwo down and that economic growth will be “moderate” this year, picking up in the second half.
Is that a pipe dream? probably not, but even the Fed has said that the housing slump and it’s effect overall will be worse than previously expected. “The correction of the housing sector was likely to continue to weigh heavily on economic activity through most of this year - somewhat longer than previously expected”. This statement was taken from the Fed’s May 9 meeting.
MoneyNews.com believes that the Fed is basically ignoring the probable threat of stagflation. It would “rather watch as the 2 economic disasters duke it out with each other”, as they said. Obviously, there are no real winners when it comes to stagflation. It is truly the worst of both worlds.