Inflation Saps Fed Recession-fighting Ability

Runaway gas and food prices are the most visible signs of inflation storming back in to the American economy.  The scepter of high inflation will certainly limit the Fed's ability to stave of recession with further rate cuts.  As prices go up workers demand more money to keep up with the cost of living which is like pouring gas on an open inflation fire.  If the Fed is seen as too weak in controlling inflation consumers begin to expect it which drives this upward-spiral psychology. From Bloomberg on the phenomenon: The Fed's concern: that inflation worries cause workers to demand bigger pay increases to make up for the loss of buying power, setting the stage for a wage-price spiral reminiscent of the late 1970s. Dallas Fed President Richard Fisher made clear this week that p