Federal Reserve: Economy "Generally Weak"

Specter Of Inflation Looms Over Economy Wracked By High Food And Energy Prices

(AP)  The U.S. economy remained "generally weak" heading into summer as rising costs for energy and food pounded consumers and forced some companies to push their own prices higher.

The Fed's new snapshot of business conditions, released Wednesday in Washington, underscored two big sore spots for the country: listless economic activity coupled with high energy and food prices. Those rising prices carry the risk of both spreading inflation and putting another drag on overall economic growth.

Chafing under price hikes, "consumer spending slowed ... as incomes were pinched by rising energy and food prices," the Fed said. Manufacturing activity, meanwhile, was "generally soft" and the housing market remained stuck in a rut.

Businesses also were hit by higher costs, especially for energy, metals, plastics, chemicals and food. Such reports were "widespread," the Fed said.

To cope, manufacturers in several areas "noted some ability to pass along higher costs to customers" the Fed said. Retailers, however, reported "mixed results with respect to raising final goods prices."

Over the past week, Federal Reserve Chairman Ben Bernanke and his Fed colleagues have been sounding an ever-louder alarm against inflation. Given those concerns, Bernanke has signaled the Fed's rate-cutting campaign, started last September to bolster the weak economy, is probably over for now.

Many economists predict the Fed will leave its key rate at 2 percent, a four-year low, when it meets next, on June 24-25.

For now, "policymakers won't raise rates because of concerns about the economy, but they can't lower them because of concerns about worsening inflation. So it's basically a stalemate. The right thing for the Fed to do is to leave rates alone," said Stuart Hoffman, chief economist at PNC Financial Services Group.

However, with inflation moving up on the Fed's list of concerns, Wall Street investors and others are now thinking the Fed might be forced to start boosting rates later this year to curb inflation.

On Wall Street, stocks tumbled as soaring oil prices fanned inflation concerns. Oil prices closed at $136.38 a barrel.

One of the things the Fed will be paying close attention to is the extent to which people think prices will keep going up, something that can make them act in ways that would worsen the inflation climate. If such "inflation expectations" were to "drift higher or even to fail to reverse" that would have "troublesome implications," Donald Kohn, the Fed's vice chairman, said in a speech Wednesday.

James Bullard, president of the Federal Reserve Bank of St. Louis, echoed that point. "It is rule No. 1 in modern central banking that inflation and inflation expectations be kept under control," he said.

Raising rates too soon, though, could deal a set back to the already fragile economy.

It is a difficult situation for Fed policymakers.

The housing, credit and financial crises have badly bruised the economy and sharply slowed its growth. Employers have cut jobs every month so far this year and the unemployment rate zoomed to 5.5 percent in May, from 5 percent in April - the largest one-month increase since 1986.

Bernanke, in a speech earlier this week, downplayed the big jump in the jobless rate, saying the danger that the economy has fallen into a "substantial downturn" appears to have waned over the past month or so.

The Fed's powerful doses of interest rate cuts, 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, Bernanke predicted.

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 are thinking inflation will get worse.

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," the Fed chief said Monday evening.

With hiring slowing, the Fed's report on Wednesday suggested there's little danger of wage inflation taking off. Wage pressures were reported as "moderate or limited for all but a few skilled-labor positions," the Fed said. That's consistent with Bernanke's recent assessment that he doesn't see a repeat of the 1970s-style situation where workers demanded - and received - higher wages to keep up with ever-rising prices.

The Fed's survey is based on information supplied by the Fed's 12 regional banks. The information was collected before June 2.

[condumbism]

Israel First Traitor Juna McCain knows nothing about economics. All he knows is how to drop napalm on innocent civilians from a plane, and he knows how to surrender. This is the Juna McCain that the Israel First jinGOPigs dont want you to think about.

[clestes-2009]

Since the feds have generally under estimated everything by whopping percentages, the economy is really much worse andshows no signs of getting better. The price of oil remains high, unemployment has increased every month for 5 straight months, the housing crisis is in full force, the credit crisis is in full force, inflation is up, up, up and the US stock market is tanking, current healthcare options have left tems of millions uninsured and because of the increasing inflation, those seniors who are on a budget depending on social security are in serious trouble.

This is much worse than anything we have experienced since the Great Depression. Plus there is no sign that it is abating either.

shrub & co mismanaged the US economy BADLY. In fact, that is too mild a word. They could not have destroyed it better if they had planned to.

And I give credit here to shrub. I do not believe he intended to do so. He just doesn''t know what he is doing and does not surround himself with people who do.

Experience and talent do no matter to him as much as loyality. ie, look at Mike Brown. A loyal friend and completely unqualified for his job at FEMA. The result, a disaster for New Orleans. We are seriously overextended credit wise and if there is another natural disaster on the scale of Katrina, be prepared for even worse economic news.

Normally I don''t have a gloom and doom outlook, but am always realistic. The facts say we are in deep doo-doo economically and no end in sight.

[forthepeopl1]

SO NOW THE FIRST LADY IS USING THE AMERICAN TAX PAYERS CREDIT CARD!!!!

NICE AMERICANS STARVING,LOSEING THEIR HOMES,AND OUR GREAT LEADERS STILL GIVEING BILLIONS TO COUNTRYS THAT HIDE BIN LADEN, AND WILL NOT LET US GO INTO THE HILLS TO GET HIM.



U.S. first lady Laura Bush told participants at the conference that the United States would contribute more than $10 billion in aid. She said donor countries must not turn their backs on Afghanistan, saying the country has reached a "decisive moment" for its future.

Germany has also announced it will give $653 million toward redevelopment efforts in Afghanistan over the next two years. Norway has pledged $730 million over the next five years.

U.S. Secretary of State Condoleezza Rice said Wednesday the United States will deliver its aid over two years. She acknowledged that there are concerns about corruption in Afghanistan, but she said she believes President Karzai understands the corrosive nature of corruption and is looking for help.

[trillion1]

Isn''t this the same guy who said the underlying economy was "strong" just a few days ago?

[walt1944-2009]

The "HEAD of the FED" says that the economy is "generally weak" and will probably stay that way!

Right after the Gulf War in 1991-92, DADDY George Bush I was hit with a recession too, which he refused to accept (and still does today!), only to have "Wild Bill" Clinton get elected and pull us out of it.

Today we have JUNIOR George Bush II having TWO recessions under his belt and he refusing to accept, like his DADDY, that they really are recessions, let alone that he CAUSED both of them!

It''s nice to see that the Bush family maintains the neocon Fascist Nazi Republican tradition of having a recession for every term their man is in office. There have been recessions under Teddy Roosevelt, Taft, Hoover (a major DEPRESSION), Ike, Nixon, Reagan, Bush I, and Bush II (2 of them!)!

You would think we would have learned something about all of that by now!!!!

SIG HEIL, BUSH!!!!
sig heil, DEFINITELY MORE OF THE SAME, McCain!!!!

[inventagod2]

This wargasm Bu$h is enjoying has a high cost...

[gopsoccermom]

This is all Bill Clintons fault. Nobody can deny that.

[mudrose-2009]

The biggest problem we have is it took bush 7 1/2 years to do this damage, but it will be 20 years to correct it.
Posted by rharrin1

It''s gonna take more the 7 1/2 years to fix the damage that Clinton did. George just started and Obama will make sure he takes us straight back to Jimmah Carter.

[trishab4]

Israeli Agents planning to kill Obama?

http://www.ynetnews.com/articles/0,7340,L-3554776,00.html

[trishab4]

Israeli Agents planning to kill Obama?

http://www.ynetnews.com/articles/0,7340,L-3554776,00.html

[trishab4]

Israeli Agents planning to kill Obama?

http://www.ynetnews.com/articles/0,7340,L-3554776,00.html

[trishab4]

Wanna fix the economy? Feed Ben Bernanke into a wood chipper feet first, and put it on governmental pay-per-view. The national debt would be erased.
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Posted by SistaTee at 01:29 AM : Jun 12, 2008

- Oil Conglomerates/AIPAC/PNAC and their subjects in the White House should be dealt with this fate. (They have been at the origin of the latest price inflation) America would break every deficit (accumulated, current and projected) for the next 50 years.

-Barack Obama needs to do a heckov deep cleaning job in order to bring about his promised CHANGE.

[mcvet]

Survivial 101--first in series....
MY, My, if people must live under an overpass, be sure to save for a pillow and blankets first. Also, be sure to have a duffel bag to put them in the morning. If you want coffee, take a bottle of water, an electric pot and an inverter to hook up to a battery so that you can make your coffee.


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Posted by BajaJohn1 at 12:55 AM : Jun 12, 2008
+ report abuse

You know a lot of concerned people come here to debate and to let their opinions be known about an INCOMPETENT Government that has taken this nation from a BALANCED BUDGET and a Surplus to RECORD DEBT and the worst economy in MY life time of over 60 years. In the middle of all that discussion we have a simple minded uneducated BOOTLICKER pop up with THIS insanity! I guess all that can be added is.... SIEG HEIL BUSH!!

[mcvet]

I wish that I could agree with you. However, I''''m afraid that no matter who wins the election, the U.S. will merely see the next act of the same theatre.


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Posted by anon00 at 03:19 AM : Jun 12, 2008
+ report abuse

I have lived in Illinois for a long time and you are DEAD Wrong on this one. DEAD WRONG!

[naucoming4u]

FDA: Tomatoes are safe to eat again. Well, maybe not safe, but you can still eat them because our friends are losing money and McDonalds need to make you believe that the fries you are eating will be balanced by vegetables other than ketchup.

Posted by ApprxAm at 01:37 AM : Jun 12, 2008
........

With the axing the Bush regime has done to our government infrastructure, (the FDA)...

... McDonalds fries would actually be less dangerous to eat on a regular basis!

"Eat your fruits and vegetables"...

...but make sure your life insurance is paid up first!

[oneworldusa]

"Generally weak?"

Is this depression speak? Because earlier it was, ''Oh, we''re not in a recession.'' ''Oh, but then we could be.'' ''Maybe.'' ''Not sure.''

[trbundro1277]

The solution is equally apparent: vote against the GOP in November and see that these fiscally irresponsible criminals never get the chance to ''''trash'''' the economy, again!
Posted by stn_sage at 10:24 PM : Jun 11, 2008
**I''ll Second that! Vote Democrat this November!

[apprxam]

FDA: Tomatoes are safe to eat again. Well, maybe not safe, but you can still eat them because our friends are losing money and McDonalds need to make you believe that the fries you are eating will be balanced by vegetables other than ketchup.

[apprxam]

MCbush, Obama, RonPaul ain''t doing Sh*t...This is the long, 500 year line of Hansiatic League over-throw of the state (people), plain and simple. When will we learn in America that freedom ain''t free, nor is it ours.

Bad economy? When did that start? With GW and Kenny Boy @ FriendRon raping the people of California? Or the war that we won, but isn''t quite over yet? Or is it all of that sweet, slippery Iraqi oil that Al Qaeda steals everyday, sells and uses to buy weapons to kill American Soldiers and Marines? COuld it be all the money we spend ignoring the imjured and mentally wounded men and women who come home? How can we possibly be sure that these people know whether or not there is a resession going on or not?

[sistatee-2009]

Wanna fix the economy? Feed Ben Bernanke into a wood chipper feet first, and put it on governmental pay-per-view. The national debt would be erased.