If we get an inflationary recession, it is because of Greenspan and Bernanke, Clinton and Rubin, Bush and Paulson, and their inability to keep their hands out of the markets, tinkering and fine-tuning them to advantage their own ends and those of their cronies.
Will they never learn? Do they really care?
Fed minutes: Severe downturn possible
Tue Apr 8, 2008 2:40pm
WASHINGTON (Reuters) - Members of the Federal Reserve's policy-setting committee worried at their most recent meeting that housing and financial market stress could trigger a nasty slide in the economy, even as inflation pushed higher, minutes of the meeting released on Tuesday show.
"Some believed that a prolonged and severe economic downturn could not be ruled out given the further restriction of credit availability and ongoing weakness in the housing market," minutes of the March 18 meeting said.
A staff forecast buttressed that somber outlook, projecting "a contraction of real GDP in the first half of 2008 followed by a slow rise in the second half," the report said.
At the same time, Fed officials found recent inflation reports "disappointing," noting also with concern that some indicators of inflation expectations were edging higher.
Policy-makers said there were limits to what could be done through interest rate cuts to deal with problems underlying the collapsed housing market and the credit crunch, but agreed trimming borrowing costs might provide some help.
However, Fed officials said it would be hard to calibrate policy responses because their aggressive rate cuts in recent months would take some time to show their effects on economic activity.
The Fed has cut benchmark interest rates by three percentage points to 2.25 percent in six months.
U.S. rate futures rose on the gloomy Fed economic outlook, and the implied chance of the federal funds rate being cut to 1.75 percent by mid-year rose to 90 percent from 68 percent. U.S. stocks stayed weak after the minutes were released.
The Fed said that while exports were getting a boost from a cheapening U.S. dollar, there also was a risk that the devalued greenback will further add to inflationary pressures from costlier oil and other commodities.
(Reporting by Mark Felsenthal and Glenn Somerville; Editing by Theodore d'Afflisio)
