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Thursday, November 08, 2007

Two Headlines, One Policy Instrument

Think these are mutually exclusive?

The Fed did say the inflation and recession risks were balanced after its last rate setting meeting. We are currently experiencing both negative demand shocks (through housing) and negative supply shocks (through oil prices) of uncertain duration and magnitude. While these both tend to slow output, they have different effects on inflation and call for different policy responses. Fun times at the Fed.

    Posted by on Thursday, November 8, 2007 at 02:34 PM in Economics, Monetary Policy | Permalink  TrackBack (0)  Comments (15)


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