Cyrillic Partners

Federal Reserve Board Governor Randall S. Kroszner made a speech Friday that pundits are interpreting as a signal that the Federal Reserve will not cut rates in December. You can find the whole text of his speech at the Fed’s site. Here’s an excerpt:

Against this backdrop, inflation expectations have remained reasonably well anchored. The prices of oil and other commodities continue, of course, to be a source of major uncertainty for the overall inflation outlook. Currently, quotes from futures markets suggest that investors expect food and energy prices to come off their recent peaks next year. That said, I think it’s also fair to say that political and economic developments around the world, not to mention the vagaries of the weather, make any forecast of oil and other commodity prices highly uncertain. Moreover, spillovers from the latest run-up in crude oil prices could begin to put upward pressure on core inflation.

So, to sum up, the economy seems poised to grow for a while at a noticeably slower pace than it did during the summer, in part because of lower home sales, less residential construction, and generally smaller increases in consumer and business spending. A sequence of data releases consistent with the rough patch for economic activity that I expect in coming months would not, by themselves, suggest to me that the current stance of monetary policy is inappropriate. I will, of course, continue to carefully assess the implications of the incoming economic data and financial market developments for economic growth prospects and the outlook for inflation.

[Thanks to the University of Chicago Chronicle for the image.]

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