Paul Volcker has reminded the markets that the U.S. will need to raise interests well before stimulus-induced inflation becomes apparent, if indeed it wants to avoid a period of higher than desired inflation.
Even if unemployment remains high and the economy is sluggish.
CNBC: “You have to act against what seems like common sense. If you wait, it’s too late,” Volcker said while answering questions after a speech on financial markets at Harvard University’s Kennedy School of Government.
The question, then, is how much weight Volcker’s words carry these days inside the Obama White House? It’s great that there’s someone towing the line, who theoretically has the ear of the President, but Volcker is perceived as having been marginalized — which might also explain why he feels comfortable speaking out.