Nov 24 2007
Greenspan: Dollar Drop Not Fed Problem
Alan Greenspan told a group of executives in Oslo that the falling dollar shouldn’t be a Federal Reserve priority unless it is creating inflation.
From Reuters: Asked if the Fed should take the weak dollar into account, he said: “To the extent that a weakened dollar is of such a margin that it creates problems, then yes, the central bank needs to address that. One has to ask what are the inflationary consequences of a weakening of the dollar.”
This question may have more to do with the mix of imported and domestic goods that a person typically consumes. A basket of mostly imported goods would drive up an individual’s consumer-price-index. It also has to do with the price stickiness of import-competing goods. As prices on imported automobiles go up, for example, how long will it take General Motors to increase the price on its cars and trucks?
At least the former Fed chairman isn’t spouting as much doom and gloom earlier this month (see our post on it).
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[…] that for an effect of the falling dollar on inflation? Our plan this year is to buy a Christmas tree after Christmas and in advance of the new year. […]