At the Fed, a Debate Over Countering Inflation Grows Louder

By LOUIS UCHITELLE

JACKSON HOLE, Wyo. — With the decline in oil prices, inflationary pressures are easing for the moment. The Federal Reserve’s policy makers all acknowledge as much. But that has not halted their debate over whether to raise interest rates now to avoid higher inflation in the future.

The issue moved to a broader forum over the weekend: the Fed’s annual gathering in this mountain resort. The event drew central bankers and economists from abroad, the latter sometimes quite critical of what America’s central bank has done.

“The Fed overreacted to the slowdown in economic activity,” Willem H. Buiter, a professor of European political economy at the London School of Economics and Political Science, declared in his presentation, offering harsh criticism of his hosts. The Fed, he added, “cut the official policy rate too fast and too far and risked its reputation for being serious about inflation.”

Ben S. Bernanke, the chairman of the Federal Reserve, rejects that thinking, as do a majority of the Fed’s policy makers. They argue — and several of them repeated their arguments in interviews here that were mostly off the record — that they had no choice but to cut the key lending rate that the Fed controls to 2 percent from 5.25 percent in just eight months. Otherwise, they said, the housing and credit crises would have resulted in much more damage to the economy.

At the Fed, a Debate Over Countering Inflation Grows Louder....