Does The Economy Growth Really Causes The Inflation Risk? by Milota Sidorova

All day long, the Wall Street waited for Fed official declaration concerning a possible recession on Wednesday.A quite controversial report came out. Despite of slow economy growth, the inflation risks have risen.September's housing crisis brought huge recession to the global market, and forced Fed to cut benchmark interest rates up to the 3 percent. Six month later, in the beginning of the year, the sluggish growth is expected to point to the planned 2.7 percent by 2009. Philadelphia Fed President Charles Plosser assures the press about clear way without complications. Follow up speech slightly admits, that the only possible risk of recession, could be the housing market.Seems logical, until the newt declaration comes out & the central bank must lower the inflation risks.According the report, The Federal reserve had left a key interest unchanged on Wednesday as the economy signaled that it was on track for a soft landing in which growth slowed enough to restrain inflation.Bob Murphy, a PhD in economics from New York University, and the author of Minerva called that a crazy idea. In his article he explains, that the only possible reason for inflation is the dollar supply. It means, not the increasing number of products, labor support is the cause of growing prices, but the Central Bank's strategy, literally, if they print out more dollars, the prizes will grow consequently with rising inflation risks.Maybe, it's good to point out the mechanism, instead of barely taking impacts.To a question of the future rate cuts, Richmond Federal Reserve Bank President Jeffrey Lacker proposed a gloomy answer. "We may cut interest rates again, we may not -- there's a lot of speculation about that," he declared.He admitted the possibility of trimming interest rates further to deal with declining output in the economy.

related story: http://news.yahoo.com/s/nm/20080206/bs_nm/usa_fed_dc;_ylt=AqTao_Qs8OvT4QqMZEy1_Qys0NUE

by Milota Sidorova for PocketNews (http://pocketnews.tv)

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Edited by: Katarina Bosanska