Rocky Economic Times, the Moods Term Paper

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The cautious policy of raising of even short-term interest rates shows that inflation, rather than simply limiting economic growth is again a concern for the Fed. Historically, the Fed has always been most concerned about the economy growing too fast, outpacing real development, than other government agencies, which are apt to look upon growth with purely rose colored glasses. Despite the recent strong economic numbers regarding job growth, "which analysts said were broad-based and reflected more than just hiring connected to reconstruction efforts after the recent hurricanes, the economy is still showing signs of fragility." Thus, the Fed's caution and encouragement of saving rather than spending is of concern.

Moreover, "real federal funds rate, the rate charged on overnight loans between banks, has averaged about three percentage points above the inflation rate. While Fed officials have warned that there are no clear rules for a neutral or normal rate, they have made it clear that today's rates are low enough to aggravate inflation if left unchanged," the question of debate within the Fed is "how fast the rate increases should occur," not if they should occur, much to the chagrin of those who would like to see more spending encouraged on the part of the consumers, and those who fear that the current state of economic recovery is due to temporary factors, such as seasonal factors and deep discounts offered by makers of cars and other durable goods, rather than permanent and long-lasting improvements in the American economic infrastructure.

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Higher oil prices, the shaky economy, and the Fed's determination to raise interest rates all show continued signs of a contradictory, rather than a salutary economic future in the coming months for America.

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