Why are they so complacent about the inflation issue?
During the current campaign, the inflation issue is notable by its absence — except for Republican boasting about conquering it.
And the central bank panicked, fixating on the inflation issue at the expense of the real economy.
"The inflation issue recently has been higher levels of service sector inflation," Stuart Green, chief British economist at HSBC in London, said.
"We think there will be an inflation issue in the market," he said, adding that the Federal Reserve's decision to keep interest rates low for a considerable period might make some investors worry more about an inflation surge.
"It would be extremely difficult for R.B.I. and the government to arrest simultaneous downward pressures from equity, currency and money markets while struggling to address low growth and high inflation issues," Mr. Harding said.
The monetary side is important, of course — there is the inflation issue to deal with, there is the financial sector liberalization — but I think the real sector, in my mind, is the single most important thing right now.
The two dissenters in Tuesday's decision were Richard W. Fisher, president of the Dallas Fed, and Charles I. Plosser, president of the Philadelphia Fed, both of whom have been outspokenly hawkish about inflation issues in recent months.
To a certain extent this point is conceded by the Democrats, who privately acknowledge they were thrown on the defen sive when the President used his televised veto of the origi nal bill to raise the inflation issue against a Democratic Congress.
Europe has some of the same inflation issues that we face despite the refusal of the European Central Bank to lower rates.
