Tuesday, June 06, 2006

Inflation and the Fed

I was somewhat bemused to hear Federal Reserve Chairman Ben Bernancke say yesterday that recent increases in measures of inflation were "unwelcome" and that he intends to ensure that the trend (of rising inflation) is not continued.

Given that one of the primary causes of inflation is the rate of increase in the money supply which is oveseen by the Federal Reserve itself one could be pardoned for thinking that this implied that the Federal Reserve was intending to reduce the rate of increase in the money supply?

Somehow I don't think so. In any event, the Federal Reserve stopped publishing M3 data earlier this year effectively depriving the public of the easiest means of knowing what the rate of increase in the money supply is.

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