Federal Reserve Chairman may Raise Interest Rates to Stop Inflation

If the Fed raises interest rates to stop inflation that will worsen the recession. It's been tried before in the 70s and 80s and always led to a downturn in the economy:

Ramping up his tough anti-inflation talk, Federal Reserve Chairman Ben Bernanke is raising expectations on Wall Street and elsewhere that the central bank could boost interest rates sooner than anticipated if high oil and food costs threaten to spur a broader bout of spiraling prices.

Over the past week, Bernanke has been sounding the alarm ever louder about the threat of inflation.

In his latest remarks on Monday evening, Bernanke played down the May spike in the nation's unemployment rate, saying the danger that the economy has fallen into a "substantial downturn" has faded.

At the same time, Bernanke sent a fresh warning that the Fed will be on heightened alert against inflation dangers, especially any signs that investors, consumers and businesses think prices will keep going up and change their behavior in ways that will aggravate inflation.

The Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation," Bernanke said.

The Fed chief and his colleagues have been signaling that the Fed's rate-cutting campaign, started in September, is probably over given mounting concerns about inflation. And, little by little, Bernanke is preparing people for the prospects of higher rates down the road.