Sunday, January 9, 2011

Somber words for the U.S. Federal Reserve

During testimony this past week to the U.S. Senate’s Committee on the Budget, Federal Reserve Chairman Ben Bernanke said, “in circumstances like those we face now, very low inflation or deflation does not necessarily imply any increase in household purchasing power. Rather, because of the associated deterioration in economic performance, very low inflation or deflation arising from economic slack is generally linked with reductions rather than gains in living standards.”

MY TAKE: Given that the Federal Reserve will move forward with an additional $600 billion of stimulus, the economy remains in a state of adjustment. Factors that investors must incorporate into their assessment process include the impact from rapid increases in commodity prices, along with the lackluster employment market recovery.

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