Movements in Inflation and Interest Rates over 30 years

Chart of the Week for November 4-November 10, 2005

Looking at the graph, we can see fluctuations in interest rates, represented by the Federal Funds rate, and the inflation level over the past 30 years. The primary inflation-fighting tool available to the Federal Reserve is setting the Fed Funds target rate. Soon to retire Federal Reserve Board Chair Alan Greenspan has been dubbed "The Maestro" for his positive influence containing inflation during his 18-year tenure. His would-be successor, recently nominated Benjamin Bernanke, has a reputation as an inflation hawk and is expected to continue Greenspan's dominance.

While the threat of higher inflation may be an issue for Bernanke, it remains to be seen what future challenges lie ahead for him and will impact the economy during his time in office.

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