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Is the Fed right about inflation and interest rates?

Wednesday, 9 May 2007 | 2:44 PM ET
Federal Reserve Board Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, Feb. 14, 2007, before the Senate Banking Committee hearing on monetary policy. (AP Photo/Dennis Cook)
Dennis Cook
Federal Reserve Board Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, Feb. 14, 2007, before the Senate Banking Committee hearing on monetary policy. (AP Photo/Dennis Cook)

"It is time the fed really considered the rising oil prices in their equation of inflation. When you are pumping gas into your pickup at a rate of $4-$6 a gallon, it will be too late for the fed to react. People will have to make the choice not only between driving to their job and buying a new tv, but necessities like food and paying their rent."
-- Richard B, Florida

"The Fed needs to think about raising rates. Inflation is higher than government numbers and consumer debt is increasing too fast."
-- George S., Mississippi

"We are in the beginning stages of a stagflation environment with regards to the economy. Some people say inflation is not that bad (they are looking at the inflationary figures that exclude food and energy prices) but look at the gas pump and your bill at the grocery store -- items we all use and need to a great degree. To exclude these is like an ostrich sticking its head in the sand."
-- Michael M.

"The question is irrelevant because the Fed is irrelevant. The Fed has lost any of the credibility that it may have had in the past. The Feds influence on, and its’ ability to control the economy on longer exists. However, because the Fed and the other Central Banks (Europe, Japan, China, Etc.) have allowed their currency printing presses to run full out for so long, the excessive liquidity that now exists has transferred the power (to influence) from the Central Banks, to the hedge funds, and to the private bankers."
-- Dan W., Canada

"Inflation is understated. While the cost of housing is down, homeowners are not getting a break on property taxes. True inflation is about 5%. To get long term growth back on track we need to invest in the short term pain of the Fed tightening significantly."
-- Gordon S. TX

"The Fed is right in holding the interest rates steady. In fact it wouldn’t hurt to ease about a quarter of a point to help housing, but “steady as she goes” sends the right signal that we are on the right track and leave well enough alone."
-- W.

"The Fed is too worried about inflation, but I think they're correct to hold interest rates where they are."
-- Gregg H., Ohio

"Inflation is grossly understated. Housing, food, transportation, health care, energy, and education. Which of these is really only increasing at 2%?"
-- Patrick F, California

"The Fed is not telling the whole truth when it comes down to inflation. Inflation is everywhere and by the time Memorial Day arrives we'll see $4.00 a gallon plus nationwide just in time for the traveling crowd to hit the road!"
-- W.D., Texas

More Comments...

"So far, no. Housing is a huge investment for every American. That industry is in the dumpster and nothing short of a rate cut will cure it. However, given the dollar's weakness abroad, we are between a rock and a hard place."
-- Vicki S., Mississippi

"The Fed needs to hold rates for now. Inflation is a problem and is understated by the government to keep the COLA on Social Security low. People are losing their houses because of mortgage fraud, not interest rate increases. This stagflation environment has backed the Fed into a corner, but it is too early to consider cutting rates."
-- Eddie

"The Fed is living in their million dollar fantasy land. Have they bought a gallon of milk lately? Who said there is no inflation? Postage is up. Gas is up. Rent is up. Food is up. Everything is up. Wake up. And the USD is worthless now. Raising rates will just put everyone back into reality."
-- H.K.P.

"The Fed needs to abandon the concept of 'core inflation.' The true inflation rate includes the cost of gasoline."
-- Ron D., Pennsylvania

"No! The Fed is a monster and big bully. The interest rates should be cut. Enough said!"
-- Jonathan, Alabama

"In our area inflation is running wild. With gasoline at $3.00 per gallon and home heating beyond the reach of most people. If the Fed remains steady or lowers interest rates the dollar will go ahead and collapse and if the Fed raises rates the economy collapses. It sounds like the stagflation of the Carter years."
-- Gale B., Kansas

"I would not care to be in Bernanke's shoes. Between restraint from slowing down the economy and fighting inflation, that is a job and a half to contend with."
-- Pete R., California

"In my opinion the Fed is dead on. The prices of household staples have increased dramatically in the past two to three years -- often disguised in 'new' or 'enhanced' products, they are essentially the same staple items at a remarkably price. Just go into a supermarket today and try to find products that are priced less than $1.00. Very difficult - even in the candy section."
-- Ray T.

More Comments...

"The Fed is slowly choking off the economy here in the U.S. by pursuing inflation targets that are too restrictive. The Fed has already severely impacted the real estate markets in a number of key geographic areas of the country. By damping the real estate sector, they have created a ripple effect that is impacting the entire supply chain (plumbing, appliance manufacturing, carpentry, masonry, textile, etc.) for the sector."
-- P.F.

"Basically yes, but I think I would raise rates now. Inflation is obvious to anyone who shops."
-- Joseph F., Florida

"The Fed is turning a blind eye to inflation as they try to mask the debt and monetary problems of the US by inflating all asset groups, and consequently, lowering the value of the dollar."
-- Andy T., Florida

"The fed has a impossible job but should allow the money supply to expand at a fixed rate and then let every other factor adjust to that factor."
-- Gordy L., Washington

"Despite the rise in interest rates by the fed, they have continued to inject record levels of liquidity that is now filtering into stocks. They continue to say inflation is " above their comfort zone" yet do nothing about it."
-- Ron, Florida

"The Fed has been walking a tight rope for some time. Housing will continue to decline; inflation is more than the Fed is willing to state, just look at oil, gas, food, etc.. Commodities and investments in Asia will soar! This is no time to be invested in the USA."
-- Else J., Florida

"Economy is in a growth recession and housing will get worse until the FED cuts rates and adds liquidity. They always go too far in tightening cycle."
-- Dan, New Hampshire

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"I don't think anybody knows (including the Fed) if the interest rate is just right for the current inflationary environment. That's why the Fed is doing the "wait and see" pattern holding the interest rate."
-- J.S.

"We need relief on interest rates -- lets not wait until its too late and people start losing what little is left."
-- George L., New Jersey

"Considering the amount of money the Fed is pumping into the system, I think the Fed is seeing inflation tick up as planned."
-- V.R.

"It's a shame that we all have to be treated equally by Fed policy. Certain sectors and areas of the country remain in deep recession and are desperate for a rate cut while we hear that the national data suggest an economy that's overheating."
-- John C., NJ

"Inflation is an issue that we should be vigilant about...I believe that the Fed’s strategy -- even thought the economy has hit a soft spot -- is working, and the effects of it are seen from the latest inflation numbers."
-- A.G.

"They were initially but are too painfully slow to adjust their interest rate policy to the evidence of a slowing economy."
-- Bob A., Virginia

"No! High interest rates hurt small businesses, housing, and the disadvantaged. Most inflation is caused by high energy costs."
-- Mark E.

More Comments...

"The Fed is dead wrong. The subprime housing market is going to have a much greater effect on the economy then anything else."
-- Jeffrey B.

"I am a realtor in Florida. The housing market is in a depression. The Fed doesn't seem to take that into account. People are losing their homes in foreclosure. Sales are flat. We need some good news to get things started. If they believe we are having a soft landing, I would equate that with a gear up landing in the Rocky Mountains. They need to stop looking at indicators and go out and see how their policies are hurting people. It is not just the real estate market, its all related markets, i.e.: carpet business, window treatment companies etc. Please tell them to wake up!"
-- Pat M.