Low rates or high rates?

Charles Plosser, the president of the Philadelphia Federal Reserve, says inflation has to be tackled even if the financial downturn hasn't been resolved.

Ouch! Just when we need low rates the most, the Fed has stopped lowering the federal funds rate and now is possibly considering an increase. You see the Fed controls the money supply by offering a higher or lower federal Funds rate (which is the rate it lends money overnight to banks), which will either slow down the economy (high rates) or speed it up (low rates).

The issue we have right now is runaway fuel costs which have directly impacted food costs; I don't know about you, but it hurts when I go to the gas station and then the supermarket on the same day.

There are sectors of the economy that are vibrant; look at the iPhone from Apple Computer, heck, anything that Apple is making is selling like hotcakes. High tech is rocking, but as good as that sector of the economy is, there are others, like autos and transportation, that are having severe problems.

I have to disagree with Mr. Plosser, as I can't see increasing rates having as big an impact on inflation since the real price or production has been skewed by oil increases, and given the increase in global demand, high oil prices seem here to stay.