Fed officials voiced their opinions on the risk of inflation during the September 22-23 Federal Open Market Committee Meeting, the minutes for which were released today. A big question that arose during the meeting concerned whether or not the Federal Reserve should begin scaling back its efforts to support the economy in order to account for the risk of inflation.

Chairman Ben Bernanke and Vice Chairman Donald Kohn have suggested that inflation will be kept at bay in the coming months and years by the slack in the economy created by unused resources, such as idle workers and machines. However, the minutes of the meeting revealed that many members of the committee questioned whether or not the use of resources could accurately predict inflation.

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Fed Officials Split on Inflation Risk

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Kohn’s comments on the economy, which he made at a conference at Princeton University, are not quite as optimistic as those made by the Federal Reserve’s staff in late April. Still, Kohn defended the governmental program to buy up toxic assets as necessary to avoid an economic crisis that could have been even worse.

As far as the lack of any foreseeable rate hikes, Kohn suggests that near-zero rates strengthen the healing effect of economic stimulus packages, meaning that the two should come hand-in-hand.

Source: Wire Reports

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Federal Reserve Optimistic about Economy