Tuesday, August 08, 2006

I still like the bet 

Even though I lost.
Readings on core inflation have been elevated in recent months, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
That looks mostly to me like "the value of additional information about growth, productivity and prices is much higher now than before, so we're going to keep the option of 5.5% in our pocket for six weeks." I believe Jeffery Lacker's dissent -- he wanted to increase to 5.5% now -- is the first dissenting vote of the Bernanke chairmanship, in his fourth meeting. I expect more dissent later this year, and this will be the first test of Bernanke's skills of persuasion.