Fed
Rising food and energy costs are still trickling through the economy, complicating the outlook for inflation, Boston Federal Reserve President Eric Rosengren said on Tuesday.
The central bank still expects prices to trend down as the economy softens, but it is less confident in this outlook because of simmering commodity costs, Rosengren said in a speech in Cape Cod.
“The effects of significant increases in food and energy prices are still feeding through the economy, as are the impacts of appropriately aggressive monetary and fiscal policy responses to the recent financial turmoil,” he said.
The United States has been struggling with twin crises in the housing and financial sectors, developments that have forced the Fed to cut interest rates sharply since September.
Investors now believe the central bank will leave benchmark rates on hold at their current 2 percent level quick payday loan. Tough talk on inflation from a string of Fed officials have also prompted the markets to begin pricing in an eventual rate hike, as early as October.
The economy has barely sputtered forward in the last two quarters. Last week, the government reported a jump in the unemployment rate from 5.1 percent to 5.5 percent, the biggest one-month rise in 22 years.
At the same time, oil prices have reached a record high near $139 a barrel and the average cost of gasoline nationally has surpassed $4 a gallon for the first time. These trends should slow growth, but also put upward pressure on prices.
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