Fed in ‘uncharted waters’

October 11, 2010 05:01

“Christina Romer, who recently stepped down as a White House economic adviser, said the Fed is in uncharted waters and it is unclear how much further easing will accomplish.” -Reuters

By: Reuters via CNBC.com


“The U.S. Federal Reserve runs the risk of diminishing returns from its next round of money printing to amplify the subdued economic recovery, but that won’t stop it from trying.

Printing money is not without consequences, at home and abroad. Eswar Prasad, an economist at Cornell University, said he is concerned that investors will abruptly shift from worrying about deflation to predicting inflation as the Fed’s actions debase the value of the dollar.

In that scenario, “we get spiraling inflation that the Fed will have to move aggressively to counter, leading to another bust just as the economy recovers,” he said.”


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