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Controlling Inflation Is Fed Priority #1 for Now, Experts Say

Tuesday, 20 Mar 2007 | 1:55 PM ET

David Jones, chief executive officer of DMJ Advisors and a former economist at the Federal Reserve, told CNBC’s “Power Lunch” that he expects the Fed to maintain interest rates at current levels until inflation is under control.

The Fed won’t cut rates “until they see the whites of the eyes in a slowdown in the economy” he said Tuesday.

“They’re not going to respond directly to either the subprime problems or the decline in the housing market,” Jones said. “…I think this is going to be the big difference between the (Ben) Bernanke Fed –- a somewhat more academic Fed -- and the (Alan) Greespan Fed. Greenspan was the master of picking out these moments when the economy might be weakening. He would probably be cutting rates sooner rather than later. I think the Bernanke Fed is going to worry about that inflation number until it comes down to their 1% to 2% comfort zone, and therefore they’re going to be cutting rates later rather than sooner.”

FOMC Meeting
The Fed is meeting to discuss rates and most think they'll stay the same, with David Jones, DMJ Advisors CEO & former Federal Reserve economist; John Miller, Nuveen Investments Nuveen High Yield Municipal Bond portfolio manager and CNBC's Sue Herera

John Miller, a portfolio manager at Nuveen Investments, said inflation will continue to be the Federal Reserve’s primary concern.

“We saw inflation data come out last week for February that was still tracking in a range of 2.5% in a year-over-year basis,” he said. “That’s higher than their stated range. To ensure that they still have their inflation-fighting credibility intact, I think they have to maintain this tightening bias until they see an up-tick in the unemployment rate or an easing in the inflationary pressures.”

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

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Kenny Polcari