Economic Turmoil Persisting; Vigilance Needed in Face of Spiraling Prices –FED’s Mishkin
FED Governor Mishkin, speaking in Israel, dishes out some stiff warnings and hard realities:
* Current financial crisis one of the worst since the Great Depression; credit conditions could deteriorate further if the economic outlook declines.
* Necessary to keep both inflation and inflation expectations low — “vigilance”
* Increased mortgage delinquencies and foreclosures will keep housing prices low — an adverse feedback loop is present (first such mention by a FED official)
* Bright side: little evidence of wage-price spiral
* Declining housing prices and rising energy prices are keeping risks to growth on the downside. Substantial headwinds still exist in the US, as well as in Europe