FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
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POSSIBLE OUTCOMES: ALTERNATIVE SCENARIO 1<br />
r<br />
• Thus far the Fed’s unprecedented d monetary policy has not sparked a large increase in the<br />
rate <strong>of</strong> inflation<br />
• Inflation has remained relatively muted with core inflation (ex volatile energy and food)<br />
remaining below 2%<br />
• Despite this, many economists are still worried that the seeds <strong>of</strong> future inflation are being<br />
sown today through the Fed’s easy money policy<br />
o<br />
o<br />
o<br />
They worry continuous printing <strong>of</strong> money will eventually lead to a marked decline in the dollar<br />
This would greatly increase the cost <strong>of</strong> imports but would also flow through to domestic goods due to<br />
the fact that a large percent <strong>of</strong> domestic goods use imports purchased internationally<br />
If inflation does start it would put the Fed in a particularly challenging position<br />
♦<br />
♦<br />
They could continue their accommodative process risking runaway inflation<br />
Or they could raise interest rates to slow inflation risking choking <strong>of</strong>f the nescient recovery<br />
Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 22
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