Not just gas prices are high. The Fed needs to start thinking of raising interest rates.
Americans know inflation when they see it – even if the Fed says "Don't worry." Gas-pump prices are hitting record highs, and prices are rising for food (4.8 percent), healthcare (5.1 percent), and even women's apparel (7.3 percent). Is the Federal Reserve expecting a rise in joblessness to cool these inflation jets?
Let's hope not.
For months, the central bank has been rapidly opening its money spigot to boost banks caught in the credit crunch of the subprime mortgage crisis. It hopes to prevent an economic slowdown from descending into recession.
But in high finance, timing is everything and the Fed can't take its eye off the twin threat of inflation, which is more damaging and more difficult to lasso than a recession.
In January, consumer prices were rising at a 4.3 percent annual rate. Elderly Americans on fixed incomes are especially vulnerable to this erosion of their assets. At that rate, an income of $50,000 can drop in value to $35,000 within a few years.
Mr. Bernanke should listen more to their concerns and other Americans than to Congress and Wall Street. He must show political courage by raising interest rates sooner rather than later.
Bernanke's predecessor, Alan Greenspan, wasn't always so expert in his timing. After lowering rates dramatically from 2001 to 2003, the Fed failed to raise interest rates quickly enough to help prevent a housing-price bubble. Its collapse is still leaching equity out of home values.