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Posted at 6:53am on Jun. 10, 2008 Market Mover: Dealing With Higher US Inflation

Geithner Drops a Hint, Bernanke follows with a bomb

By blackhedd

A funny thing happened this morning as I was writing a story for you about Timothy Geithner’s important speech yesterday at the New York Economic Club: Inflation came back.

Geithner is the President of the New York Federal Reserve Bank, and his main topic yesterday was the gap between today’s innovative financial-market practices and the regulatory apparatus (including the Fed) that is supposed to keep markets stable.

This is a critical topic of great interest to policymakers around the world, and a consensus is growing that a “unified global framework” for financial regulation is needed. I’ll write a complete post about this subject later on.

But in the Q/A after his speech, President Geithner was asked (inevitably) about where the economy is going. He said that demand is getting softer, but he also said that the Fed will be watching inflation very carefully.

Federal Reserve officials always tread a very fine line in public statements because they know everyone will parse every comma for signals about the direction of interest rates. By emphasizing inflation over economic slowness, Geithner left an impression that they might head higher.

Keep reading…

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