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Saturday, June 07, 2008

"Does Chinese Inflation now Constrain the Fed?"

Brad Setser:

Does Chinese inflation now constrain the Fed?, by Brad Setser: Tim Duy, with rather impressive timing, says yes. Rising inflation in China and the Gulf, the key regions in today’s “dollar zone,” now have a large enough impact on prices in the US to limit the Fed’s ability to cut rates further. Rather than setting monetary policy for the US, Duy — who had an office next to mine at the US Treasury back when we were both very junior new hires ten years ago — claims the Fed has to set policy for the entire dollar zone. ...

It is an intriguing argument ...[and] needs to be to be considered carefully, even if I am not yet sure I fully believe it. ... [...continue reading ...]

    Posted by on Saturday, June 7, 2008 at 12:24 AM in Economics, International Finance | Permalink  TrackBack (0)  Comments (6)

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