No Worries, Greenspan Is On It!
In an article entitled Party Pooper, Alan Greenspan is labeled as an "inflation hawk" by cutting an raising interest rates as needed to either slow inflation or increase economic expansion. The Fed raised interest rates for the seventh time since June, bringing the federal funds rate - which banks charge one another on overnight loans - to 2.75 percent. The Fed also did something it hasn't done in a while: warned investors about inflation. As expected the market is in a tizzy with the Dow Jones industrial average, which traded as high as 10,984 in rececent weeks, sank to 10,430 following the Fed's move. The new worry about inflation, and especially the notion that companies were starting to pass along increases in the cost of wholesale goods, has diminished the allure of the stock market that some believe could be the turning point for intestors. While the ability to raise prices may be good for corporate profits in the short-run, inflation is bad for consumers in the long-run. The Fed's statement was widely viewed as a warning that if prices rise noticeably, some sizable rate increases are to expected down the road.