Reply #11: Iraq war may have consequences for end-game on interest rates

[UpInArms]

http://www.marketwatch.com/News/Story/Story.aspx?guid={A7DB7B95-7C58-41FB-AF89-1F65136D670E}&siteId=mktw

WASHINGTON (MarketWatch) -- Name an unpopular war that Congress and the White House were reluctant to pay for with tax increases, leading to budget deficits, sweeping global economic changes and crippling inflation.

<snipping past the obvious answer>

"The idea is a similar one. If you have a war and don't pay for it, that will eventually lead to a risk for inflation, which is a concern for the central bank," said Nigel Gault, the chief U.S. economist at Global Insight, an independent research firm based in Waltham, Mass.

<snip>

For their part, Federal Reserve officials never mention the war in their speeches about the U.S. economic outlook.

And the government's economic statistical agencies haven't volunteered much information, either. Indeed, the last report from the Bureau of Economic Analysis looking at the impact of the war on the nation's GDP was released in November 2003.

But an open discussion of the war's economic impact could soon replace the current whispers in closed-door Washington economic-policy settings, as Wall Street and Main Street begin to understand that interest rates could be moving higher than expected as a result of the conflict.

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