Thursday, July 17, 2008

US inflation rate at 17-year high

This past month, US inflation accelerated at its fastest pace in 17 years, official figures have shown, driven higher by surging energy prices

In his second day of congressional testimony on Wednesday, Fed boss Ben Bernanke said inflation was too high and it was a key objective for the central bank to bring it down. Many analysts now believe that the central bank may have to leave borrowing costs on hold, or even increase them, as it tries to steer a faltering economy through turbulent times.

Gary Thayer, from Wachovia Securities, says that the Fed is facing a tricky balancing act. "This increases concern that the Fed is not going to be able to lower interest rates if the economy remains weak."

But he added: "And as long as the economy remains weak, it will be hard for the Fed to raise rates to fight inflation."

[BBC News]

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