It seems Ben Bernanke has painted himself into a corner. If he raises interest rates he could tip the economy into recession. But if he doesn’t do something about inflation Americans could end up worse off, still. Consumers probably can’t withstand gas prices much longer.
Most Fed watchers agree the aggressive period of cutting interest rates appears to be over. The trouble starts when you try to figure out what period the Fed has now entered.
In their statement, Federal Reserve Chairman Ben Bernanke and his colleagues let it be known that they are now less worried about the economy slipping into a recession and more worried about inflation.
The wording, however, was somewhat bland, even by the guarded standards of Fed-speak, especially given the pronouncements of Bernanke and other Fed policymakers, who openly worried in recent speeches about the inflation pressures that could be sparked by a weak dollar and surging energy prices.
It seems pretty clear the Fed is in a pickle. So what’s the way out?
It’s going to be a tough road says Steve Cortes, founder of Veracruz Research on Fast Money. From here I think a dollar intervention is necessary. The US government needs to get into the private market and actually buy US dollars.
How would you trade?