Stagflation in US economy will force Fed to raise rates in spite of decline in economic growth in 2007
Joesph Weinman
Oct. 23, 2006

The US economy is experiencing clinching inflation. The commodities are taking a breather. The liquidity in the system is helping the gold stay higher. The core inflation and capacity utilization are causing some serious headache for the Fed. Right now it seems the economy has avoided a hard recession and a soft landing is associated with substantial inflation pressures. The labor market is low paying but tight – underemployment is high while the economy enjoys full employment. This is typical in third world countries. Every one has a job to survive but collectively everyone is struggling everyday while prices are inching up.

The economic growth will be in the range of 2.5 to 3.5% in 2007. The price deflator will show higher pipeline inflation. Fed starting March will raise rates again. That will in turn weaken the economy and the risk of a deflation driven deep recession will increase many folds.

Stagflation in US economy will force Fed to raise rates in spite of decline in economic growth in 2007
Joesph Weinman
The economic growth will be in the range of 2.5 to 3.5% in 2007. The price deflator will show higher pipeline inflation. Fed starting March will raise rates again.
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