The Federal Reserve is anticipating a battle on two fronts: rising inflation and a slowing economy. But right now, t
he Fed is sitting on the sidelines.
The minutes from the Fed's December Open Market Committee meeting show a central bank torn between its
duty to quell inflation and its obligation to help the economy grow: "Several members judged . . . the downside
risks to economic growth in the near term had increased a little and become a bit more broadly based than
previously thought."
The minutes continued, "Nonetheless, all members agreed that the risk that inflation would fail to moderate as
desired remained the predominant concern."
But instead of tackling the risks head on, the Fed held rates at 5.25 percent. The Fed did add language to the
Fed statement indicating that a rate increase to combat inflation is possible in the future.
Proof that the Fed is between a rock and a hard place is one member's request for the statement to say that
rates could go up or they could go down. That's reassuring!
The Fed next meets at the end of January. Whether they've picked either battle to fight will be revealed then.
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