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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

The case for the Fed raising interest rates

Any minute now, the Federal Reserve is scheduled to release its most recent statement on interest rates and minutes of its Federal Open Market Committee, which lets us inside the Fed's heads as they predict the U.S. economy.

The Fed is widely expected to leave the target for its bank lending rate at historically low levels of zero to .25 percent. Those who believe this is a good idea say that it could be disastrous to raise the interest rate while the economy is still trying to recover and unemployment is 9.8 percent and rising.

But some economy-watchers are making the case for the Fed to raise its key rate:

-- In Forbes, Brian S. Wesbury and Robert Stein predict a doubling of inflation over the next 18 months because the Fed flooded the system with new money last year to stave off a liquidity crisis. "Loose money is never a good long-term stimulant. In fact, the longer it takes the Fed to move toward the exits, the more damage will be done, and the harder it will become to exit at all," they write.

-- Euro Pacific Capital president/crisis-caller/Connecticut Senate candidate Peter Schiff writes: "To save our currency, the Fed must get very aggressive with interest rate hikes and reign in the supply of dollars that have flooded the world over the past few years." (You can read an interview I did recently with Schiff by clicking here.)

-- Henry Blodget has a sarcastic take on "clever Ben" Bernanke purposefully waiting too long to raise rates. Blodget pleads for Bernanke to raise rates before "he plunges us all into hyper-inflation."

-- Felix Salmon at Reuters argued for a modest rate hike as far back as June: "By raising short-term interest rates in the Fed funds market, and by keeping long-term interest rates low through quantitative easing, the Fed would be able to act much more decisively if and when inflation fears really started to appear."

-- Frank Ahrens
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By Frank Ahrens  |  November 4, 2009; 2:12 PM ET
Categories:  The Ticker  | Tags: Federal Reserve, Henry Blodget, inflation  
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