Bernanke May Boost Interest Rates

The Financial Sector Has Taken The Fed Chairman's Tough Anti-Inflation Talk As A Signal That He Will Raise Interest Rates

(AP)  Ramping up his tough anti-inflation talk, Federal Reserve Chairman Ben Bernanke is raising expectations on Wall Street and elsewhere that the central bank could boost interest rates sooner than anticipated if high oil and food costs threaten to spur a broader bout of spiraling prices.

Over the past week, Bernanke has been sounding the alarm ever louder about the threat of inflation.

In his latest remarks on Monday evening, Bernanke played down the May spike in the nation's unemployment rate, saying the danger that the economy has fallen into a "substantial downturn" has faded.

At the same time, Bernanke sent a fresh warning that the Fed will be on heightened alert against inflation dangers, especially any signs that investors, consumers and businesses think prices will keep going up and change their behavior in ways that will aggravate inflation.

The Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation," Bernanke said.

The Fed chief and his colleagues have been signaling that the Fed's rate-cutting campaign, started in September, is probably over given mounting concerns about inflation. And, little by little, Bernanke is preparing people for the prospects of higher rates down the road.

For now, many analysts still expect the Fed to hold rates steady at 2 percent, a four-year low, when policymakers meet next on June 24-25. However, Bernanke's remarks raise the odds that rates could go up later this year, instead of next year as many have been predicting, should inflation show signs of worsening, they said.

"I think the Fed wants to wait until the economic coast is clear to raise rates," said Mark Zandi, chief economist at Moody's Economy.com. "But Bernanke is saying the Fed will sacrifice near-term economic growth to the altar of stable inflation" should prices start to take off, he added.

Bernanke said a government report last week showing the unemployment rate rising from 5 percent in April to 5.5 percent in May - the biggest one-month jump in two decades - was "unwelcome." However, the Fed chief said other forces should "provide some offset to the headwinds that still face the economy."

The Fed's powerful doses of interest rate cuts, along with the government's $168 billion stimulus package, further progress in the repair of problems in financial and credit markets, a gradual ebbing of the drag from the deep housing slump, and still solid demand from abroad for U.S. exports should help the economy over the remainder of this year, he said.

"Inflation has remained high," largely reflecting sharp increases in the prices of globally traded commodities, Bernanke said on Monday. "The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations."

In the first four months of this year, consumer prices have risen at an annual rate of 3 percent. That's down from a 4.1 percent rise - the biggest in 17 years - registered in 2007, but it's still higher than the Fed is comfortable with.

Oil prices, which on Friday registered their biggest single-day leap, moderated Tuesday and settled at $131.31 a barrel as the dollar gained some ground against the euro. Retail gasoline prices, however, marched to a new record average of over $4.04 a gallon.

"As consumers, we all buy food and gas with high frequency, so sharp relative price movements for these goods get our immediate attention," Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a speech Tuesday. A situation where people would keep expecting such price increases is "clearly an outcome to be avoided," he said.

If these high energy prices force companies to boost their prices for goods and services, inflation will spread dangerously through the economy. And if workers demand - and receive - higher wages to help them stay ahead of escalating prices, that could worsen inflation.

Last week, Bernanke said he didn't see the country headed toward a repeat of a dangerous 1970s-style wage-price spiral. At that time, the country suffered from "stagflation," a toxic mix of stubborn inflation and stagnant growth.

"The Fed is committed to not repeating the mistakes of the 1970s," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "Bernanke appears to believe that inflation risks are rising relative to the downside risk to the economy," she added. "The Fed is still likely to hold rates steady at the next meeting but may signal a somewhat tougher stance on inflation." Reaser predicts the Fed's key federal funds rate, now at 2 percent, will climb to 3.5 percent by the end of 2009.

Bernanke is trying to use tough talk to rein in inflation expectations of consumers, investors and businesses. "The markets are starting to prepare themselves for an earlier rate hike. That may be exactly what the Fed wants to ensure that inflation expectations remain tethered," Zandi said.

With the economy bruised badly by the housing, credit and financial crises, some analysts insist it would be a mistake for the Fed to boost rates too soon.

"Rising interest rates now would be the kind of policy the Federal Reserve pursued in 1929," said Peter Morici, an economist and business professor at the University of Maryland. "Is that the kind of signal a central banker and student of the Great Depression wants to send to fragile markets?"

[wogerwabbit]

All I know is I lost 90% of my investments in the dot com crash and 50% of the remainder during the last 7 years. I want to know where all our money has gone. I think we were robbed by the Fed, Wall Street and our government... they are the perpertrators of the crime.

[CB_Brooklyn]

Kucinich presents Bush impeachment articles.

Thirty-five articles were presented by Rep. Dennis Kucinich to the House of Representatives late Monday evening, airing live on C-SPAN.

http://rawstory.com/news/2008/Kucinich_presents_Bush_impeachment_articles_0609.html

[cdfoxtrot]

All I know is I lost 90% of my investments in the dot com crash and 50% of the remainder during the last 7 years. I want to know where all our money has gone. ....

Posted by WogerWabbit

Try Eye-Rack and Rat Cheney''s bank account.

[simplemind2]

What goes up must come down.
Reversely is also true - what comes down will go back up!
Common sense 101!

[vnveteran72]

Is there anyone in America that thinks this Dimbulb has the Slightest Clue???.......LMMFAO.......

[vnveteran72]

I lost all my Stock Value back in the day, and was so pisssed off that I searched for an answer to the problem. I now Trade Indice Futures exclusively, and wouldn''t own a share of stock if you gave it to me.
It''s absolutely the best thing I ever did. If I''d been doing it 30 years ago, I''d never have had to work all those years like a Dog, for wages. I''ve tried to tell people about Futures Trading, but they just aren''t interested. More for me!!!

[fightfascism]

The war on the middle class continues. Welcome to the beginning of America the 3rd World Country!

[radiob-2009]

Posted by vnveteran72 at 12:43 AM

Future prices puts and calls are difficult to guage, and the risk is low, compared to the return that is possible. Most people are unaware of how to do this with triple witching days and the ability to predict the future of a index or a stock is not as easy as it sounds. I dumped all of my stocks in 2001 before the bubble burst and made out,do not see many investments not to make beyond housing and land and one has to be careful and diligent.

[ricklf1]

This Country is standing at the threshold of a 1930''s depression and at the same moment is facing untold inflation. Raising interest rates now would help greatly, because doing that would improve the US dollar value against other currencies. A stronger U.S. Dollar would help to stabilize world oil prices. It is a step in the right direction if Bernake would do it now.

[watcher269-2009]

Yup - The economy is doing soooo well (for the Rich that is) that the Fed will raise interest rates to make sure that you poor folks out there who are trying to survive on a week by week basis become poorer so that they may party!

After all - as the republicans say - it''s your fault that you are poor and in the crisis that you are in - your fault - pull yourselves up by your bootstraps and stop whining!

[oneworldusa]

Ok. Everything costs more. People are in crisis mode. So, the fed wants to possibly RAISE interest rates? This will make it unaffordable for the McMansion wannabes, as if it didn''t happen already, but I digress. Better get that equity line now. Oh, wait, you no longer have equity because of the greedy bankers and people trying to one-up the Joneses.

[slim1h2o]

All I know is I lost 90% of my investments in the dot com crash and 50% of the remainder during the last 7 years. I want to know where all our money has gone. I think we were robbed by the Fed, Wall Street and our government... they are the perpertrators of the crime.

Posted by WogerWabbit at 11:09 PM : Jun 10, 2008

Yes..we were robbed. And the people responsible should be held accountable, and jailed.

But if you want to know where the money went, just look towards Iraq. That''s a good chunk of it right there.

[bgwinnett]

"The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation," -- Bernanke.

Any specifics about cutting rates? No just some tough rhetoric on Inflation, with the aim of artificially boosting the Dollar. He''s bluffing.

[johngoodnews]

Gasoline prices are driving the increases in every sector of our economy and is destroying the United States, and leaving the control of the supply of energy in the hands of the private sector will only exacerbate the problem. The oil companies need to be treated as utilities and regulated and if they don''t like that, then nationalized, and a national investment made in extraction of the huge natural gas (methane hydrate) resources the United States.

[omnibus66]

Evidently this idiot was cast in the same mold they used to manufacture GWB. Interest rates will have absolutely no effect on oil prices, since they are controlled by OPEC and market speculation.

The price of EVERYTHING is going up, and Bernanke the Brain doesn''t have enough sense to figure out why. Not a surprise, when you take into account who appointed him.

The only thing that will bring oil prices down in the short term would be to fix oil profits at a percentage of production costs, i.e. price controls. You don''t have to reduce oil company profits, but you do have to take the speculators out of the picture.

[pollroller1]

I know that a lot of people are hurting, but part of the problem is the fact that everybody wants instant gratification.
"I want it all and I want it now."LOL

[gopsoccermom]

Just like everyone else Bush has appointed, isnt Ben doing a heck of a job? Lets be patriotic and give him a round of applause.

[dimmu19]

Impeach bush. Read why http://www.35articles.com/

[demslie]

Just like everyone else Bush has appointed, isnt Ben doing a heck of a job? Lets be patriotic and give him a round of applause.

Posted by gopsoccermom

Reserve Chairman Ben Bernanke has spent 40 years serving this country. Democrat Hate Rage and Anger Requires that anyone is to blame but Democrats. This is the Platform of the DNC and O''Bama. O''Bama lies everytime he says that he will bring the country together. Democrats Hate Bush, Hate the Military, Hate Capitalism, Hate Christianity, Hate Family Values, Hate Rich People and Now comes O''Bama who Hates White People and The American Flag. Wow, the Democrats are sure endearing themselves to the American Voter.

[lochlan-2009]

"Bernanke May Boost Interest Rates"

May? The markets have already moved in expectation of his interest rate hike. Bush has come right out and said he is going to begin to strengthen the dollar (the first good thing he''s done for America since he took office (of course he is the reason the dollar dropped so much in the first place. So do you praise someone for fixing something they broke so they and their cronies can make money on the fall and rise in value.)

[naucoming4u]

And the stagflation hath begun!

[naucoming4u]

Bernanke thinks raising interest rates will help our economy.

The captain of the Titanic thought a Dixie cup would be adequate in bailing out the Titanic.

[robroyh390]

Last week, Bernanke said he didn''t see the country headed toward a repeat of a dangerous 1970s-style wage-price spiral"

Yeah - this was the same dumb *** whoo supported his beloved buddy Bubbles Greenspan''s claims that the assinine monetary policies and assinine tax cuts of Chimpy''s first term were guaranteed to ensure unsurpassed economic growth, low inflation, and ever inncreasing tax revenues

Where''s the prognosis from SpongeBob Square Pants - that''s far more likely to be accurate than that of d1ckhead Bernanke

[robroyh390]

The price of EVERYTHING is going up, and Bernanke the Brain doesn''''t have enough sense to figure out why. Not a surprise, when you take into account who appointed him.


Posted by omnibus66 at 07:42 AM : Jun 11, 2008"

Yeah and we all know who voted for the ******* who appointed Bernanke - step forward the american people.....sure hope you dumb *** enjoyed that beer who had with the retarded ape

[usbrit-2009]

Re money and Iraq - from the BBC yesterday

"A BBC investigation estimates that around $23bn (#11.75bn) may have been lost, stolen or just not properly accounted for in Iraq.

For the first time, the extent to which some private contractors have profited from the conflict and rebuilding has been researched by the BBC''s Panorama using US and Iraqi government sources.

A US gagging order is preventing discussion of the allegations.

The order applies to 70 court cases against some of the top US companies."

It goes on to say "the gag order is unlikely to be lifted while President Bush is in office."

[usbrit-2009]

Democrats Hate Bush

Posted by demslie

Finally something I can agree on with this GOPig troll. The rest of its'' latest screed is the same BS as usual.

[aldon61]

--------------------------------------------------------------------------------

Posted by demslie at 09:03 AM : Jun 11, 2008

Let''s take these one at a time.

1. Bush, you''re probably right on this one.

2. Military; you''re way off base here, we love the military and many of us have served proudly. What we hate is an "unecessary war".

3. Capitalism; wrong again, love it! We do believe in helping others less fortunate though, that''s probaly what you mean.

4. Christianity; WOW, where are you coming from? Most of us (not all) are totally Christian and many of us attend church regularly, do you?

5. Family values; this is a hard one because the term is highly subjective. But if you mean raising our children to know right from wrong, respecting one''s parents and elders, working hard, acknowledging that we are subject to a higher power, then you''re wrong again.

6. Rich people; no, we don''t hate rich people. We don''t like wealth without responsibility though; the wealthy of our nation, like Bill Gates, Warren Buffet, Ted Turner are all to be admired. Each of these people have given literally billions of dollars to help others; how could we hate them? If you''re referring to Ken Lay, etal, again, we don''t hate them, we do hate their actions though.

Hope this set''s the record straight.

[davidlar2]

Interest rates absolutely need to go up. Negative real interest rates (interest rates below the rate of inflation) are destructive to the economy in the end.

Unfortunately, I don''t believe Bernanke has the brains or the balls to actually raise interest rates.

[mrright5]

Democrats Hate Bush

Posted by demslie



You mean most US citizens hate what he has done to America, the majority of Republicans included!

[usbrit-2009]

Posted by aldon61

Well said! I used to go line by line with this troglodyte myself, but you might as well be reading the bible to a monitor lizard, so I quit. Keep up the good work as long as you can though.

You would have thought Bernanke would have learned something from Greenspan, apparently he hasn''t.