Apparently, there is an ongoing debate as to who’s right, between Goldman Sachs and Morgan Stanley on the inflationary risks of the monetary policy the Fed has put in place. Morgan Stanley is worried the Fed will be keepin its easy money policy in effect for too long, bringing about inflationary threats. Goldman Sachs thinks this is untrue, and argues the Fed has 10 options it can choose from to prevent it from happening.
Goldman Sachs Group Inc. says when it comes to inflation, the Federal Reserve can relax. That kind of talk makes Morgan Stanley nervous.
The debate underscores a widening division among economists over whether the central bank will hold onto the gains it’s achieved in fighting inflation over the past three decades. Record liquidity injections and a projected federal budget deficit of $1.85 trillion threaten to undermine that legacy.
Read the entire report HERE.
On this matter, I’d have to side with Goldman Sachs. I am confident that Bernanke will be able to put a lid on inflation, if indeed it does begin to rise above target levels, and it can exit the programs it has in place quite conveniently. It will definitely face some opposition but the way Ben has handled things the past several months have been welcomed by many.