The Federal Reserve yesterday left no doubt that it’s worried about inflation. Not worried enough to raise interest rates, but worried nonetheless.
Announcing that it would keep Fed funds at 5.25%, the FOMC advised that the “predominant policy concern remains the risk that inflation will fail to moderate as expected.” True, the central bank believes otherwise, predicting that inflation pressures appear “likely to moderate.” But it’s sleeping with one policy eye open just the same.
Or so we’re told. It’s debatable whether the back and forth is comforting or frightening. In any case, the Fed will have to act eventually, for good or ill. Meanwhile, they’re watching and so we can all sleep peacefully.
Well, almost everyone. The gold market, for one, is skeptical. An ounce changes hands for around $680, just under generational highs set a year ago. Commodities generally haven’t thrown in the towel on the inflation debate either. The CRB Index, although well off its highs in 2006, looks intent on keeping an open mind about the future path of pricing pressures.