Tags: Fed Survey Inflation Worries Businesses

Fed Survey: Businesses Becoming More Worried About Inflation

Friday, 24 February 2012 12:55 PM

Inflation will become a problem in the longer term for the U.S. economy, although price pressures will remain manageable at least for now, a Federal Reserve Bank of Atlanta survey shows.

Federal Reserve officials insist their ultra-loose monetary policies such as asset purchases from banks and commitments to keep interest rates low for years have not seriously pushed up inflation rates.

High prices at the pump, for example, are caused by factors other than Fed policies, such as supply strains.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

Nevertheless, the Fed survey of 168 firms in the southeast U.S. finds inflation should average at 1.9 percent over the next 12 months, just below the Fed's 2 percent goal, the Wall Street Journal reports.

However, that average jumps to 2.9 percent in five to 10 years, the survey finds, well above Federal Reserve comfort levels.

"What our panel of firms appears to be telling us is that the risks to the inflation outlook — in both the near term and longer term — aren’t particularly balanced," Atlanta Fed economists Mike Bryan, Laurel Graefe and Nicholas Parker write in the study, according to the Journal.

"In the near term, they weigh the inflation risks more heavily to the downside. But looking over the next five to 10 years, the panel sees the inflation risks leaning decidedly to the upside."

The consumer price index rose 0.2 percent in January from December, when prices were flat, according to the Labor Department.

Gasoline prices jumped 0.9 percent in January, which accounted for the overall increase.

That's not enough, some experts say, to convince the Fed that prices are rising too high, and measures such as quantitative easing — asset purchases from banks designed to speed up recovery at the risk of pushing up inflation rates — may be coming.

"(The data) doesn't prevent another round of quantitative easing to stimulate the economy," said Brian Kim, a currency strategist at the Royal Bank of Scotland in Stamford, Connecticut, according to Reuters.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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Friday, 24 February 2012 12:55 PM
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