Worries about Federal Reserve’s Handling of the Economy
Washington---Some Republicans are beginning to worry about the Fed Chairman Ben Bernanke’s handling of the US economy. Paul Ryan, (R-WI) told CNBC today that he is concerned that the Fed may be ignoring the signs of inflation.
The Wisconsin Republican and the head of the House Budget Committee told CNBC that “my fear is they're going to try to mop up all this excess money after the cow is out of the barn, after the inflation expectations have been formed".
Ryan’s comment echoed the concerns expressed by some economist and commentators that the Fed is hyper-inflating the economy at an alarming rate.
The Fed recently voted to maintain its zero interest policy and inject an additional $600 billion into the economy by buying Treasury Bills.
Ben Bernanke is expected to testify before Congress about the Fed’s vision for the US economy. Ryan’s comment came one day before Bernanke’s expected appearance on Capitol Hill.
Ryan told CNBC that he wants Bernanke to articulate his vision for the nation’s economy so that the law makers on the Hill can get a sense for what is the right monetary policy for America.
The Fed Chairman in an interview with Wall Street Business Journal dismissed the inflation projections and stated the recent spike in commodities’ prices is attributed to growing global demand. Bernanke said it is unfair “to attribute excess demand in emerging markets to US monetary policy”.
In the mean time, commodities’ prices have spiked sharply worldwide, a sign that many analyst point to as evidence for inflationary pressures on the economy.
However, the US economy has not experienced the sharp rise in the price of goods and services seen elsewhere in the world. Bernanke believes high unemployment and spare capacity will serve to keep inflation at bay.
The US inflation rate is about 1 percent while emerging markets like China have a 5 percent rate of inflation.
The Fed critics fear the US economy will succumb to inflationary pressures in the long run. As companies compete for raw material globally, their cost of raw material is certain to increase. Once that happens, analyst fear those higher costs will be passed on to consumers and the prices in the US will begin to rise.
Once prices begin to rise dramatically, the Fed will be forced to raise interest rates that opponents of the Fed fear will slow down the economy or worse will halt the economy’s fragile recovery.
Tags: Paul Ryan , Fed Chairman , Inflation , US Economy , Republicans , Economy
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