The FOMC can now wait a little while, to make sure that the withdrawal of additional stimulus through large-scale asset purchases does not lead to a repeat of the sharp decline in money growth that we saw, previously, in 2010. But, so long current rates of 5 1/2 to 6 percent money growth continue, they will eventually lead to inflation rates that meet or exceed the Fed’s long-run target. To prevent such overshooting, the FOMC will probably have to start raising rates, as most of its members currently anticipate, sometime towards the middle of next year.
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More Good News from the Fed
The FOMC can now wait a little while, to make sure that the withdrawal of additional stimulus through large-scale asset purchases does not lead to a repeat of the sharp decline in money growth that we saw, previously, in 2010. But, so long current rates of 5 1/2 to 6 percent money growth continue, they will eventually lead to inflation rates that meet or exceed the Fed’s long-run target. To prevent such overshooting, the FOMC will probably have to start raising rates, as most of its members currently anticipate, sometime towards the middle of next year.
READ FULL ARTICLE HERE