Wednesday, June 27, 2007

The Fed's Perspective

This excerpt from the FT, in light of my previous post on the Fed, is important:

By Krishna Guhain Washington

Federal Reserve officials are expected to discuss ways to redirect market
attention from current core inflation to its forecast of headline inflation at
this week's meeting of the rate-setting open market committee.

The meeting, the first since the sell-off in the bond market pushed up long-term
interest rates, will end with the Fed affirming its focus on inflation risk.

However, there could be extensive changes to the statement to reflect evolving
concerns on prices.

To date, the Fed has talked about the current level of core inflation, which
excludes food and energy prices, as "elevated" and emphasised the need to ensure
it comes down.

But with core inflation as measured by the personal consumption expenditure
deflator likely to edge below 2 per cent in May, Fed officials no longer agree
on whether it is elevated or not.

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