There are many points to argue about what is right and wrong when it comes to Social Security and other age based entitled programs. But one point I think we can all agree on without beating the point to death is that Social Security is in serious trouble as we currently use it.

I am not interested in placing blame or running through all the statistical data why it won’t last. Simply put, we borrow from the future to pay for the present but sooner or later the future shows up. Anyone that borrowed against their homes in the last few years knows all to well how that statement rings true.

But what will Obama, McCain or other politicians going to do about it?  How about get real!

According to the American Academy of Actuaries, raising the retirement age to 70 will cut the projected Social Security deficit in half. The statistics back up this age as a base age to use to start benefits with incremental increases built in. The current system increases the social security age one month at a time to age 67 but that is not enough.

The fact of the matter is that people are living longer. In 1935 the retirement age was 65 and you could expect to collect for 12 years. Now that number is closer to 19 years. That’s the type of inflation we can live with, “age inflation”. But that puts pressure on the social programs geared to help seniors with their expenses including Medicare.

According to the National Bureau of Economics the retirement age that is more realistic is closer to 73-74. That might be pushing it a bit and probably impossible to get through politically. The American Academy of Actuaries concludes that long after all the baby boomers are gone the demographics tell us that social security will only cover 75% of its costs. Women will be affected even more since they live longer than men.

But will this be a blow to current generations regarding their expectations for retirement? The answer is no, at least not for those that have given it any thought. Many baby boomers have simply not saved enough for retirement and a large percentage of them do expect to earn some type of income through work during their retirement years.

Financial advisors are also not optimistic about their client’s chances of retiring at the current young age of 65 and having their money last. Inflation and modest investment returns over the last decade have pushed an even greater number of workers into that work longer, save more demographic that will come to dominate those tapping age based social programs.

Raise the retirement age and acknowledge the simple fact that were living longer and we need to make some adjustments to age based entitlement programs.

WASHINGTON — U.S. inflation soared to a 17-year-high annual rate in July, a government report showed, led by gains in food, energy, airline fares and apparel.
With energy and commodity prices on the retreat this month and the U.S. dollar strengthening, the report is unlikely to spook Federal Reserve policymakers into raising rates anytime soon as the economy struggles with rising unemployment and soft consumer spending.
Still, a surprising rise in core inflation that excludes food and energy last month will keep officials on edge about the possibility that food and energy prices will become more firmly entrenched in the economy.
The consumer price index rose 0.8% in July, the Labor Department said Thursday. That came on the heels of June’s 1.1% rise, which was the second largest June 1982.
Excluding food and energy, the CPI advanced 0.3% for a second-straight month.
Wall Street economists had expected only a 0.4% rise in the headline and 0.2% core increase, according to a Dow Jones Newswires survey.
Unrounded, the CPI rose 0.818% last month. The core CPI advanced 0.327% unrounded.
Consumer prices jumped 5.6% on a year-over-year basis, the highest rate since January 1991. The core CPI grew a more modest 2.5% compared to July 2007, though that’s still well above the Fed’s long-term goal of 1.5% to 2%. Over the past three months, core inflation rose at a 3.5% annual rate.
Though Fed officials said in a policy statement last week that inflation remains a “significant” concern, they are likely to look past the July data. The Fed is generally expected to keep official interest rates steady into next year, though the rise in core inflation, if repeated in coming months, could put rate hikes later this year back into play.
Many of the forces boosting prices in recent months — particularly high energy and commodity prices and the weaker U.S. dollar — have reversed since mid-July.
In a Dow Jones Newswires interview Wednesday, Minneapolis Fed President Gary Stern said even though the U.S. is “probably…in for a few more sizable increases” in overall prices measures, “assuming we don’t get a resurgence of energy prices, we will see over time a diminution of headline inflation, for sure.”
“As that occurs, I think we’ll also see some diminution of the core,” said Stern, who is considered one of the most vigilant inflation fighters on the Fed.
Energy prices swelled 4% last month, according to Thursday’s report. Gasoline prices spiked 4.1%, and natural gas prices rose 7.4%. Food and beverage prices rose 0.9%.
Medical care prices, meanwhile, increased a modest 0.1%.
But other core items posted sharp gains, a sign that higher headline inflation may have started seeping through the rest of the economy.
Clothing prices, for instance, rose 1.2% compared to June, a 10-year high. Transportation prices soared 1.7% on the month as airline fares swelled 1.3%, reflecting the rise in fuel prices. New vehicle prices advanced a modest 0.2%, reflecting falling demand.
Housing, which accounts for 40% of the CPI index, was up 0.6%. Rent increased 0.3%. Owners’ equivalent rent advanced 0.1%. However lodging away from home rose 0.7%, while home fuel and utilities posted sharp gains.
Services prices rose 0.5%.
In a separate report, the Labor Department said the average weekly earnings of U.S. workers, adjusted for inflation, fell 0.8% in July, suggesting incomes aren’t keeping pace with prices.
That, in turn, could further damp consumer spending which appeared weak in July, according to a retail sales report released Wednesday.
-By Brian Blackstone; Dow Jones Newswires;

NEW YORK — A top Federal Reserve official expressed concern Tuesday about inflation in the U.S. and warned the central bank may have to raise rates soon to keep price pressures under control.

“To prevent recent inflation from continuing to plague the economy and to avoid a rise in inflation expectations, I believe the current very accommodative stance of monetary policy will need to be reversed,” Federal Reserve Bank of Philadelphia President Charles Plosser said. “Depending on how economic conditions evolve, I anticipate that this reversal will likely need to begin sooner rather than later,” he said.

“To keep inflation expectations anchored means that monetary policymakers will have to back up their words with action,” the official added.

Plosser is currently a voting member of the interest rate setting Federal Open Market Committee, and his comments came from a speech prepared for delivery before the Philadelphia Business Journal Book of Lists Power Breakfast, in Philadelphia.

His comments arrive at a time where central bankers are struggling to contain inflation amid economic growth that has remained stubbornly weak, as financial markets have stumbled from one bout of trouble to the next. Most observers reckon the Fed is being boxed in by this mix of conditions, and as a result, it will maintain its current overnight target rate of 2% for the remainder of the year.

Plosser’s comments about the economy expressed a considerable amount of concern about inflation, although he showed less worry about the state of growth.

“We must be attentive to both growth and inflation in a consistent and systematic way, and as we are all aware, inflation has been rising,” Plosser said.

But he added “inflation is already too high and inconsistent with our goal of — and responsibility to ensure — price stability. Rates hikes “will likely need to begin before either the labor market or the financial markets have completely turned around,” Plosser said.

The official’s outlook on growth has undergone modest changes. “My own outlook for the rest of this year is for continued sluggish growth and weakness in labor markets,” with the U.S. gross domestic product likely rising by 1.7%.

“This is a somewhat better picture than just a few months ago,” Plosser said. But he added, “I still expect sluggish economic growth in the second half of this year and a further increase in the unemployment rate.”

Plosser said he expects the central bank’s preferred inflation gauge, the personal consumption expenditures index, to remain at a rise of 4% this year, reflective of energy price increases. He reckons the core PCE price index — it’s stripped of food and energy costs — will rise by 2.5%. That’s above the Fed’s perceived comfort range.

Plosser added “as energy and other commodity prices level off, I expect both measures of inflation to be lower — in the 2 to 2 1/4% range by the end of next year,” at least as long as Fed acts to make that happen.

Despite Plosser’s inflationary concerns, he argued the U.S. is not seeing a replay of the conditions seen in the 1970s, when the U.S. suffered from stagflation, a mix of low growth and persistent price pressures.

“I want to emphasize that what we have been seeing in the economy this past year, and in my own outlook going forward, is very different from the 1970s, because I see the Fed as committed to keeping inflation expectations well-anchored,” Plosser said.

The official also said the central bank’s preference for looking at prices stripped of food and energy factors may need to change. “Since energy price increases have been so persistent in recent years, I do believe more attention should now be paid to measures of headline inflation in setting monetary policy,” Plosser said.

By Michael S. Derby
Of DOW JONES NEWSWIRES

After the stock market crash of 1929, thousands of banks failed. In 1933, Congress and then President Roosevelt created the Federal Deposit Insurance Corporation, better known to all of us as the FDIC. A federal government guarantee of deposits. Its effect was to maintain stability and public confidence in the nations banking system.

The failure of Indy Mac Bank has the FDIC stepping in to meet its obligations to payback account holders the value of their insured assets. It is not pretty and as the largest bank failure to date, it is testing the system in a trial by fire way.

But if you believe Senator Barack Obama, that there is “little doubt that the US is likely in a recession” and that swift steps to shore up the housing market are a huge part of that recovery then the FMIC is the obvious answer.

Another stimulus packages and pumping money into Fannie Mae and Freddie Mac are not the answer. The government keeps treating the symptoms and not the disease.

The majority of analysts and economists that look at the problem conclude that stopping home prices from declining is the first step in any recovery. But how are prices to stabilize when lending institutions are pulling back their lending?

As the desire to lend has decreased coupled with higher lending standards and higher levels housing supply, due to a poor economy and foreclosures in some markets, prices can only continue to drop. Actual credit losses and Fannie and Freddie are small compared with their overall portfolio. What they are suffering from is a crisis in confidence.

According to mortgage industry veteran Robert Kofsky, The creation of the FMIC to co-insure FNMA, FHLMC and the Mortgage Insurance Companies against further losses would create new confidence in the mortgage markets, create higher values for mortgage bonds, create additional liquidity for the banks and create additional capital for lending since risk would be reduced by the backing by the FMIC. Using minimum standard qualifying lending requirements, losses would be limited up to a specific dollar amount per property similar to the way the FDIC insurance works now. 

This would provide buyers financing to enter the market with confidence causing home prices to stabilize. Put a halt to or at least reduce write-downs on quality mortgages, create better balance sheets and enable in some cases financial institutions to write-up some exiting investments.

This would further reduce the foreclosures and the cost to the federal government would stay low saving taxpayers money. As it stands now, we are footing the bill for all of it. Rather than pump money into the system to treat the symptoms, let’s cure the disease which is a crisis of confidence. Our history tells us that the creation of the FMIC would have the same desired effect.

Using taxpayer dollars to bail out financial institution or throwing money at the problem like the Treasury and the Federal Reserve seem to do to in their keystone cop response to these situations, finding a viable long-term solution is the only way to cure what ails the financial markets and the economy.

For more information on issues facing retirees and retirement income strategies please visit www.livelongliverich.com.

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WASHINGTON — U.S. consumer prices were under wraps last month, a government report showed, especially when food and energy prices were stripped out, further evidence that the economic slowdown is easing some of the inflationary effect of recent sharp gains in food and energy prices.

The data should ease concerns expressed by Federal Reserve officials in recent days about the inflation outlook. At a minimum, the consumer price data suggest inflation hasn’t become embedded in the economy, meaning officials can keep interest rates low in response to the slowing economy.

The consumer price index increased 0.2% in April, the Labor Department said Wednesday. Excluding food and energy, it advanced 0.1%. Wall Street economists had expected a 0.2% rise in both the headline and core indexes, according to a Dow Jones Newswires survey.

Unrounded, the CPI rose 0.207% last month. The core CPI advanced 0.104% unrounded.

Consumer prices rose 3.9% on a year-over-year basis, down slightly from the prior month. The core CPI grew a more modest 2.3% compared to April 2007. Over the past three months, core inflation rose at only a 1.2% annual rate.

The year-on-year core increase is slightly above the Fed’s presumed comfort zone of around 1.5% to 2%. The Fed’s preferred gauge, the core price index for personal consumption expenditures, is closer to that range at 2.1% annual growth through March.

The latest data should provide some relief to Fed officials that inflation isn’t gaining a strong foothold in the economy. Officials have for months focused monetary policy on housing and credit market turmoil, cutting the target fed funds rate at which banks lend to each other by 3.25 percentage points since September to 2%.

But in a statement accompanying last month’s decision to lower the fed funds rate by 0.25 percentage point, officials said “uncertainty” about inflation “remains high.” Economists took that language as an indication that officials are growing more worried about inflation and are unlikely to cut rates further.

Comments from several Fed officials Tuesday suggest inflation remains a top worry. Data on price pressures has been “disappointing” and on the “high side of where I would like it to be,” San Francisco Fed President Janet Yellen said in a speech. Kansas City Fed President Thomas Hoenig called inflation at “unacceptable levels.”

Yet the tame core CPI gain conforms to a scenario outlined by Minneapolis Fed President Gary Stern in an interview with the Wall Street Jouirnal and Dow Jones Newswires Tuesday. Food and energy-driven gains in headline inflation mean real incomes aren’t rising much, Stern explained, and “that has consequences for overall demand in the economy and that just tells you that lots of other prices aren’t likely to rise all that much.”

Energy prices were unchanged last month after jumping 1.9% on March, according to Wednesday’s report, though with oil prices hitting record highs this month, that will likely change in May. Gasoline prices fell 2% last month, but natural gas prices spiked 4.8%.

Food prices rose 0.9% on the month, the biggest rise since 1990, and 5.1% versus one year ago.

Medical care prices, meanwhile, increased a modest 0.2%, while clothing prices advanced 0.5%. Transportation prices fell 0.7% on the month, as airline fares and new vehicle prices both fell.

Housing, which accounts for 40% of the CPI index, was up 0.3%. Rent increased 0.3%. Owners’ equivalent rent advanced 0.2%.

In a separate report, the Labor Department said the average weekly earnings of U.S. workers, adjusted for inflation, fell 0.5% in April, suggesting incomes aren’t keeping pace with prices, which could weigh on consumer spending.

Average hourly earnings increased 0.1%, and average weekly hours were down 0.3.

Monthly Social Security and Supplemental Security Income benefits for more than 54 million Americans will increase 2.3 percent in 2008, the Social Security Administration announced today.

Social Security and Supplemental Security Income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the prior year to the corresponding period of the current year.  This year’s increase in the CPI-W was 2.3 percent.
 
The 2.3 percent Cost-of-Living Adjustment (COLA) will begin with benefits that nearly 50 million Social Security beneficiaries receive in January 2008.  Increased payments to more than 7 million Supplemental Security Income beneficiaries will begin on December 31.

Some other changes that take effect in January of each year are based on the increase in average wages.  Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $102,000 from $97,500.  Of the estimated 164 million workers who will pay Social Security taxes in 2008, nearly 12 million will pay higher taxes as a result of the increase in the taxable maximum.

WASHINGTON — Prices U.S. consumers paid in November for goods and services surged on higher energy costs, while underlying inflation sped up, data Friday said.

Consumer prices rose 0.8% last month, and the core rate that excludes food and energy costs climbed 0.3%, the Labor Department reported.

A separate report on the economy showed industrial production in the U.S. rose 0.3%, more than Wall Street expected.

The numbers seemed to support the Federal Reserve’s view that inflation risks remain. The policy-making Federal Open Market Committee this week voted to lower interest rates just 25 basis points to 4.25% despite indications the economy is slowing. Some on Wall Street had argued for a 50-point cut.

“The acceleration in the core does suggest, in our view, that the Fed will remain concerned about inflation risks despite the steady slowdown in growth,” Lehman Brothers economist Zach Pandl wrote in a note to clients.

The CPI’s 0.8% increase was up sharply from October’s 0.3% rise and marked the biggest climb since September 2005. The 0.3% advance in the core CPI followed a 0.2% gain in October and marked the biggest increase in underlying inflation since January.

“Inflation is not going away, and it is not just the rising cost of energy is that is punishing households,” said Joel Naroff, who runs an economic consulting firm.

Energy prices last month increased 5.7% compared with October. Food prices increased 0.3%. Medical care prices, meanwhile, advanced 0.4%, while clothing prices were up 0.8%. Transportation swelled 2.9% on the month. Housing, which accounts for 40% of the CPI index, was up 0.4%. Rent increased by 0.4%.

Friday’s report completed a trio of horrible reports on inflation. The Labor Department reported Wednesday that import prices rose at a 17-year high in November, reflecting higher energy prices as well as the weak dollar. Thursday, it said producer prices jumped at a 34-year high, largely on the back of high energy prices.

Still, annual growth in core consumer inflation is not too far above the top end of the Fed’s assumed comfort zone of under 2%. The Fed’s preferred gauge, the core price index for personal consumption expenditures, is within that range at 1.9% annual growth through October.

“With economic activity expected to be weak over the next several quarters, there is little risk of any significant rise in core inflation,” Insight Economics chief economist Steven Wood wrote in a note to clients. “Future FOMC actions will depend on conditions in the financial markets and the broader economy, not on inflation concerns.”

The economy is fighting a housing slump expected to restrain growth sharply in final months of 2007. The first estimate for fourth-quarter gross domestic product, which is the measure of the economy, is due out Jan. 30. GDP rose by 4.9% in the third quarter, which includes July through September.

The manufacturing side of the economy expanded modestly in November after a big drop during October, a Fed report showed Friday. U.S. industrial production increased 0.3%, driven higher by increased output of cars, trucks and computers. It had tumbled 0.7% in October.

“The welcome rebound in U.S. manufacturing output growth during November, in tandem with other recent data, indicate that while factory activity remains sluggish, it has yet to fall into an actual contraction,” said Cliff Waldman, economist for the Manufacturers Alliance/MAPI, a trade group.

Manufacturing production increased 0.4% compared with October. Motor vehicles and parts rose 1.7% last month, after falling 1.5% in October and 3.2% during September.

Machinery production increased 0.5% in November after dropping 1.3% in October. Business equipment increased 0.9%. Output fell 0.6% in October. Output at the nation’s technology firms increased 2.3% in November, with computers up 1.7%.

Federal Reserve Chairman Ben Bernanke moved aggressively to stop the spreading credit crunch from sinking the nation’s economy with a surprising half-percentage-point cut in interest rates, casting aside for now worries about appearing to bail out investors.

The cut, which exceeded the quarter-point reduction most economists had expected, signals that Mr. Bernanke, fearing broad damage from the market turmoil that erupted a month ago, preferred to risk doing too much rather than too little. The move came amid a sizable drop in home sales, construction and prices that could send mortgage defaults higher and damp consumer spending.

With yesterday’s move, Mr. Bernanke may have shown himself closer in style and tactics to predecessor Alan Greenspan than some market watchers had suspected. That carries risks: Critics may start referring to the “Bernanke put,” as they once spoke of the “Greenspan put” under the former Fed chairman. (A put option protects its holder from a loss on an investment.) Yet Mr. Bernanke has shown that giving the impression he might be shielding investors matters less than keeping the economy out of recession.

That’s how Mr. Greenspan interpreted the Fed’s action. “The question they had to weigh was, “Was punishing those [speculators] more important than doing something that they perceived to be in the greater good?’” he said in an interview yesterday with Fox News Channel’s Neil Cavuto.

The Fed cut its target for the federal-funds rate, charged on overnight loans between banks, to 4.75% from 5.25%. It also cut its discount rate, charged on direct loans to banks, by the same amount, to 5.25%.

The cuts sparked a rally on Wall Street. The Dow Jones Industrial Average, up just 70 points before the decision was announced, soared 335.97 points, or 2.5%, to 13739.39, its biggest percentage gain since 2003.

But in a sign some investors fear that the cut could also foster inflationary pressures, the dollar fell sharply, long-term Treasury-bond yields rose, and oil prices also jumped. Crude-oil futures surged 94 cents a barrel to $81.51, a second consecutive record on the New York Mercantile Exchange but still well short of the inflation-adjusted high of $101.57 hit in April 1980.

In a break from the past, the Fed did not say whether higher inflation or weaker growth was its greatest worry or whether those worries were equal; it thus gave no hint about what its next move would be. “Some inflation risks remain,” it said. But “developments in financial markets … have increased the uncertainty surrounding the economic outlook.” Markets put high odds on a quarter-point cut at the Fed’s next meeting, on Oct. 30.

The half-point cut put an exclamation point on a drama that began more than a month ago. At its last meeting, Aug. 7, the Fed left the federal-funds rate, its main target for short-term interest rates, at 5.25% and signaled continued worries about inflation. Days later, credit-market concerns erupted in Europe over losses in bank-linked hedge funds and off-balance-sheet investment vehicles that had purchased U.S. subprime mortgages. In the following weeks, investors and lenders became increasingly suspicious of each other and unwilling to lend, driving up interest rates for all sorts of borrowers.

On Wall Street, cries soon rose for the Fed to cut rates immediately. Instead, the Fed on Aug. 17 cut its discount rate by half a percentage point and eased terms on direct loans from its discount window in hopes banks would use the Fed’s cash to restore liquidity to credit markets. The aim, Fed officials said at the time, was to make a distinction between the Fed’s role of keeping the financial system functioning normally, and its responsibility for economic stability.

By contrast, Mr. Greenspan tended to treat financial stability and economic stability as inextricably linked, and saw a rate cut as the best way both to restore investor confidence and cushion the economy.

His critics say those cuts over time emboldened investors to take on ever more debt and drive asset prices — first stocks, then houses — to ever-loftier levels, making the ultimate correction more painful. That criticism has intensified both with the turmoil in housing and the recent release of Mr. Greenspan’s memoir.

Mr. Bernanke heard that criticism, but ultimately has shown himself of much the same mind as Mr. Greenspan: the Fed can’t take responsibility for asset prices, only for growth and inflation.

“Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally,” the Fed said in a statement accompanying yesterday’s decision. “Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets.”

Fed officials had been leaning toward a rate cut in recent weeks, but the case for the larger move may have been sealed by a report two weeks ago revealing that employment declined in August for the first time in four years. That showed the economy had slowed markedly even before the full force of the market turmoil had been felt.

As recently as July Fed officials had expected the economy to grow around 2.5% this year. While the Fed has lowered that forecast, the size of its rate cut was motivated more by the wide range of possibilities around that new forecast, due to the still-unknown reaction of business and households to tighter credit markets. The larger-than-expected cut represents insurance against more catastrophic scenarios.

The market turmoil is likely to hit housing first and hardest. Investors have grown wary of holding loans from all but the safest borrowers. That has led to a sharp jump in rates on “jumbo” mortgages — those above $417,000 — which can’t be sold to federally chartered mortgage giants Fannie Mae and Freddie Mac. The ranks of home buyers have thinned, especially in high-priced markets, and borrowers with shaky credit have difficulty finding a mortgage at any rate. The lack of buyers will likely drag down sales, make it even harder for home builders to trim bloated inventories, and force them to drop prices further.

John Makin, a scholar at the American Enterprise Institute, said even with the rate cut, the economy will probably shrink in the fourth quarter of the year, though by less than if the Fed hadn’t acted. “If the economy continues to weaken, credit conditions will weaken again because [of] falling housing prices. You’ve got to break that cycle, where you have bad credit, bad economy, bad credit, bad economy. They’re taking a first step to break that cycle.”

David Seiders, chief economist at the National Association of Home Builders, said even though Treasury-bond yields — the main determinant of mortgage rates — rose slightly yesterday, the rate cut might boost credit market confidence and lead to a narrowing in the spread between mortgage rates and Treasury yields, allowing mortgage rates to fall.

Several banks announced they were cutting their prime rates, the benchmark for many consumer and commercial loans, to 7.75% from 8.25%.

It was only a month ago the Fed declared it was still more worried about higher inflation than weaker growth. Those concerns haven’t entirely ebbed: yesterday the Fed said that while underlying inflation had “improved modestly this year … some inflation risks remain.”

Allan Meltzer, a Fed historian at Carnegie Mellon University, said the cut was a mistake, reminiscent of the 1960s and 1970s, when the Fed put more emphasis on unemployment and less on inflation in its actions. That caused inflation to ratchet higher over the years until Fed Chairman Paul Volcker brought it down again. “What’s the market saying?” Mr. Meltzer said. “That this is an expansive move that will bail out the economy.”

He added: “I never believed in the “Greenspan put.” But the market believes it, and now it will certainly believe there will be a “Bernanke put.’”

Some Fed officials may have shared similar concerns either about inflation or about the risk of stoking further speculation. Only seven of the Fed’s 12 reserve banks requested the half-point cut in the discount rate. Four of the five absent banks are headed by presidents who have raised such concerns. None of the four, however, have a vote on the Fed’s policy-making Federal Open Market Committee this year, and that may be why the vote to cut the federal-funds rate was unanimous.

As expected the Fed held the fed fund target rate at 5.25%

The statement said (for comparison the prior statement is immediately below today’s)

Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.

Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

Although the downside risks to growth have increased somewhat, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information

Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. The economy seems likely to continue to expand at a moderate pace over coming quarters.

Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

In these circumstances, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.