Tuesday, July 19, 2005

Stephen Roach: Inflation is outside the control of the Federal Reserve?

Morgan Stanley

Another of those famous Stephen Roach columns: "Is inflation global or local? That is a key aspect of the macro debate, which is now moving to center stage in financial markets. Generations of economists, policymakers, and investors are trained to look at inflation as a closed-economy phenomenon, driven by the “cost mark-up” models of yesteryear. However, as an unmistakably powerful convergence of inflation rates around the world suggests, globalization argues for a different approach. Country-specific inflation calls are increasingly becoming global inflation calls."

If inflation is global, then who's the World's Banker? Probably the US Federal Reserve for now.

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