Inflation is a Risk

Richard Fisher, the only member of the Federal Reserve to vote against cutting rates at its Jan. 30 meeting, said in a speech to bankers in Mexico City Thursday that he's still worried about inflation.

Fisher, the president of the Dallas Federal Reserve Bank, said in his prepared remarks that he was not in favor of last week's half-point cut to the federal funds rate because he "had yet to see a mitigation in inflation and inflationary expectations from their current high levels."

He said for the past few years "we have had a raucous party of economic growth fueled by an intoxicating brew of credit market practices" and added that the role of a central banker is to "take away the punchbowl just as the party gets going."

Fisher, who did not have a vote on the Fed's policy-making committee last year, said he was in favor of the Fed's rate cuts in 2007 but said he "did not feel it was the proper time to support" further rate cuts. He warned that the Fed now has to be cautious when considering more cuts.

read the CNN story

Yet another reference to the "Hayekian hangover". Is the Dalls Fed chief a Hayekian? Doubtful, but at least is aware of the theory and is showing concern about inflation.

While the media continued to stress "recession", I think we are merely in for some slow growth in 2008. By 2009, the focus will switch to inflation. Unfortunately the damage will have already been done.