The Fed continues to fight the stagflation being experienced in the US by attacked the worst offender. Of course, the emphasis is on fighting the recession as this is an election year. Whenever there is a recession, the party in power generally gets thrown out, so there is always an emphasis on improving the economy regardless of the inflationary implications. In fact, that's what we've seen this year as well. Interest rates have been lowered dramatically despite the huge rises in the price of energy, and the huge declines in the value of the USD. Finally, the Fed thought they had the recessionary pressures under control and felt that they could now begin to attack the larger enemy...inflation. But as soon as they try, the recessionary pressures rise up out of the grave.
It becomes like punching a pillow. Whichever side you attack, the other comes back to bite you.
The Fed had planned to begin raising interest rates soon. However, with the markets tanking, will the Fed still take this bold step in this, an election year? Or will they, instead, continue to lower rates up until the election.
What do you think?
