The Fed's Future; Inflation Watch
The Fed's future
The health of the economy is as uncertain as ever. While recent government reports show continued domestic growth, the dollar has been losing value-a classic sign that foreigners are losing confidence in U.S. prospects. And even though a Commerce Department report recently showed that wage inflation is under control, an influential Federal Reserve official warns that inflation is still a threat. Michael Moskow, president of the Federal Reserve Bank of Chicago, says, "Some additional firming of policy may yet be necessary to bring inflation back to a range consistent with price stability in a reasonable period of time." Translation: Interest rates may need to be hiked. Even if that's true, most economists do agree on one thing-the Fed won't raise short-term rates when it meets this Tuesday.
Later this week, after the Fed meeting, the Labor Department will release a new batch of inflation data. The consumer price index has cooled in recent months, but if it kicks up even slightly, it's likely to trigger another round of hand-wringing about what the Fed should do to curb inflation.
This story appears in the December 18, 2006 print edition of U.S. News & World Report.