Treasury rates continued to drop this week to 45-year lows in anticipation that the Fed may cut rates given the continuous weakness in the economy and the absence of any inflationary pressures.
Quotes about inflationary (16 Quotes)
The central bank runs the risk of raising the interest rate too fast. Historically, the central bank had overreacted to inflationary pressures, contributing to economic recessions.
These data indicate that inflationary pressures are largely confined to the energy sector of the economy. Moreover, because inflation is a lagging indicator of overall economic activity, the recent sharp slowing of economic growth should dampen inflation over the balance of the year.
Bankers know that history is inflationary and that money is the last thing a wise man will hoard.
As we have seen in the past few months, our inflation gauge, and most national inflation indicators, point to somewhat lower inflationary pressures ahead.
This is exactly what the Reserve Bank wants because increased investment reduces inflationary pressure and will help build capacity.
Strong economic growth will lead to higher inflationary pressures leading to more rate increases in 2006. The central bank may be looking for time before resuming tightening yet again.
Given the inflationary environment that we are in today, we believe the ability for higher pricing to cover all of the cost increases is diminishing.
While our inflation gauge and most national inflation indicators point to somewhat lower inflationary pressures ahead, I expect the Federal Reserve Open Market Committee to raise interest rates at its next meeting on Jan. 31. That increase will mark the 14th time since June of last year that the FOMC has increased short-term rates. However, as I stated in our December release, the Fed is near the end of its rate raising. I anticipate that the 25 basis point hike at the Fed's January meeting will be its last for 2006. Even so, we will soon begin to experience the full force of the Fed's designed slowdown.
The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure.
Despite the decline in headline producer price pressures, the risks of deflation have clearly vanished and signs of inflationary pressures have emerged. With the Fed holding real rates below zero, we expect producer prices to continue their upward trend in the months ahead.
The numbers are clearly good news for the Fed, ... Strong productivity numbers raise the economy's speed limit and dampen inflationary pressures, lessening the magnitude of the rate increases that the Fed would have to implement. The key question, however, is what level of productivity growth is reasonable to assume for the future.
The bank is concerned about inflationary pressure in the economy given the strength in the global economy and higher commodity prices. It will be a knock on the head for both retail and housing.
Price dynamics in gold next year will continue to be largely determined by speculative interest, backed by a myriad of justifications like inflationary risks, energy-price led economic slowdown, expectations of a US dollar correction, soaring physical demand, supply-side constraints, hopes of large scale central bank buying and so on.
I might say that when the settlement was made the Nixon administration issued what they called a second inflation alert in which the General Motors settlement was branded as being inflationary and bad for the country.
Looking ahead, we can't see what is going to cause a downturn of enough significance to take inflationary pressure out of the economy and cause the Fed to stop raising rates.