The Federal Reserve has three regular scheduled meetings between now and the November election. The meeting dates are August 5, September 16 and October 28-29. Inflation is up primarily due to the high cost of crude oil. The cost of everything from fuel, food and fun vacations is rising.

Historically, the Federal Reserve will use it’s authority to raise interest rates to slow down the economy when inflation is too high. It’s generally considered best to have a low rate of inflation. When inflation is as increasing as rapidly as it is now, it’s not considered to be good for the economy.

The Feds position on forecasting inflation is in the June Press Release:

The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.

However, many analysts believe that inflation will not moderate and will continue to elevate. If this happens with the Presidential election coming it will be interesting to see what Ben Bernanke, the Fed Chairman, does. The Fed will be cautious, because they don’t want the actions taken by the Federal Reserve to be a factor on the election. I’ve often heard that officials for a national championship football or basketball try to be certain that their actions don’t impact the outcome of the game. The Presidential election is the same type of situation. The Federal Reserve doesn’t want to be accused of actions that swing the election one way of the other.

The expectation among most analysts is that the Fed will move to raise interest rates. The reeling mortgage industry and falling stock market indices will spur the Fed to raise interest rates to combat inflation. The question is when? Will it be before or after the Presidential election?

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