washingtonpost.com  > Business > Special Reports > Federal Reserve

Quick Quotes

Correction to This Article
The headline on this article has been corrected from an earlier version.
Page 2 of 2  < Back  

Inflation Worried Fed

While "nearly all participants" expected inflation to remain "relatively low, they had become less certain of that outlook for the next few quarters," the minutes said.

And they worried that if they were wrong and inflation picked up, businesses and consumers might expect higher inflation, possibly leading them to act in ways that would make such an expectation self-fulfilling.


_____Fed Rate Cuts_____
Graphic: Historical Changes in the Federal Funds Rate
In His Own Words: Greenspan comments and Fed actions since 2001.
Timeline: Interest rate changes since the recession of 1990.
Quiz: How Much Do You Know About the Fed?
Federal Reserve Special Report

Offsetting those concerns, the members noted, were factors that tend to hold down inflation. Businesses generally could find workers easily and still had plenty of unused production capacity. Wage gains had been moderate and businesses continued to earn high profit, which would enable them to absorb many labor and energy cost increases without passing them on to consumers.

"In these circumstances, Committee members judged that the measured removal of policy accommodation was appropriate for now," the minutes said.

Looking ahead, the officials thought "it seemed reasonable to expect that these [energy] prices would level out or even decline mildly."

Since the March meeting, oil prices have fallen below $52 a barrel, but the price of gasoline has climbed. The national average for a gallon of regular was $2.27 yesterday, according to the AAA auto club.

Many economists have warned that high energy prices may do more to slow economic growth, by leaving people with less cash to spend on other things, than to feed inflation. That could reduce inflation pressures, enabling the Fed to stick to its gradual pace of rate increases, some analysts said.

The Federal Open Market Committee's next scheduled policy meeting is May 3.


< Back  1 2

© 2005 The Washington Post Company