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US Fed member formally puts inflation as a “key risk”

Tuesday, May 13th 2008 - 21:00 UTC
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The president of the US Federal Reserve Bank in Cleveland Sandra Pianalto said Tuesday in Paris that inflation remains a top risk to the economic outlook, but that the Federal Reserve's rate-cutting strategy was likely not to stoke inflationary pressures.

"While even the core price measures in the United States are rising somewhat faster than I would prefer, and inflation presents a key risk to my outlook, I believe that the Federal Reserve's policy strategy remains compatible with a low and stable inflation rate," she said. She said it was important to distinguish between inflation and relative-price pressures. The US Federal Reserve lowered its benchmark federal funds rate on April 30 by one-quarter point to 2% in what may be the last in a series of cuts aimed at aiding an economy hit hard by a housing slump and credit market turmoil. "The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote growth over time and to mitigate risks to economic activity," said Pianalto. Pianalto said that as a policymaker she found herself in "a challenging environment." She said oil, agricultural goods, and many other commodities were experiencing "strong upward relative-price pressures" with the dollar's depreciation also helping to push relative commodity prices higher. But she said globalization should not prevent monetary policymakers to achieve price stability. "Inflation is always a home-grown, monetary phenomenon that is ultimately under the control of a central bank," she said

Categories: Economy, United States.

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