At an international conference on Monday, Federal Reserve Chairman Ben Bernanke promised that inflation will be fought by the central bank. Bernanke stated that the Federal Reserve "will be vigilant to ensure that the recent pattern of elevated monthly core inflation readings is not sustained." Economists have closely been watching the Fed for any suggestion that the interest rate increases will be paused at the Fed's June 28-29 meeting. If the rate is increased, it will be for the 17th consecutive time. After Bernanke's speech, most analysts now expect rates to continue their upward march. Many expect rates to continue to rise at the August meeting, also. Investors had remained optimistic, especially given recent reports that showed slower economic growth than expected. Bernanke, however, said that there have been a number of unwelcome developments that point to inflation. For example, he noted that core inflation was rising by 3% or more. Most consumers can expect rates to continue to rise. Bernanke seems determined to maintain the Fed's credibility in fighting inflation, which has taken 20 years to establish. Many industry experts are concerned that rates will go too far in the fight against inflation. Many consider former Fed chairman Alan Greenspan's push to fight interest in the late 80's as the cause of the stock market collapse. Bernanke says that inflation is a fight that the Fed will continue to make. |
