NBER's Feldstein urges Fed not to cut below 2 pct
NEW YORK (Reuters) - Surging commodity price inflation should deter the Federal Reserve from cutting its benchmark lending rate below 2 percent, said National Bureau of Economic Research President Martin Feldstein on Tuesday.
It would "make sense" for the Fed to stop cutting its target rate at between 2 percent and the current 2.25 percent because to go lower could exacerbate the problem of inflation emanating from high commodity prices, Feldstein said on CNBC television.
The NBER is a nonprofit research organization which many analysts consider the arbiter of U.S. recessions.
On Tuesday, U.S. crude oil futures CLc1 hit record highs above $113 per barrel. Separately, a government report on Tuesday showed that U.S. headline producer prices accelerated to a 6.9 percent year-over-year rate in March. That's the sixth straight month the year-over-year headline PPI reading has been above 6.2 percent and the last time that happened was in late 1981, Asbury Research wrote in a note to clients.
Since September, the Fed has cut the fed funds target rate by three percentage points, to 2.25 percent, in a bid to alleviate the damaging effects of the worst credit market crisis in decades on a slowing U.S. economy.
Global demand for food and energy is being stoked by rapidly growing economies like those of China and India, causing sharp price rises in commodities, Feldstein noted.
(Reporting by John Parry and Richard Leong; Editing by James Dalgleish)
