July 19, 2008 (LPAC)--Recent reports have indicated that the (empty) vaults of the Federal Reserve could be playing host to a faction fight over interest rates.

Gary Stern, president of the Federal Reserve Bank of Minneapolis, is now insisting that the Federal Reserve infact should not wait until financial and housing markets stabilize to raise interest rates. "We can't wait until we clearly observe the financial markets at normal, the economy growing robustly, and so on and so forth, before we reverse course," he said. "Our actions will affect the economy in the furture, not at the moment."

Although it is not known how big a hike Stern is proposing, his call for reversing interest rate policy is in line with Lyndon LaRouche's proposal that the Federal Reserve immediately raise interest rates to 4% to halt speculation and the collapse of the dollar.

Stern, who is a voter on the rate-setting Federal Open Market Committee this year, is the only FOMC member who has served with three chairmen: Paul Volcker, Alan Greenspan, and Ben S. Bernanke. He became the Minneapolis Fed president in 1985, and in 1996 he dissented three times in favor of raising rates.

In the interview Stern said, "Headline inflation is clearly too high." He added that he is concerned that will feed through to core prices and public expectations for inflation.

While declining to say when policy makers may shift toward raising rates, Stern said, "We're going to want to, in my opinion, reverse some of those interest-rate reductions. I don't think there's any question about that. But exactly when depends on how things evolve from here."

A further indication of a faction fight at the Federal Reserve is the fact that minutes of the Fed's June 24-25 meeting, released July 15, showed that some Fed officials favored an increase in rates "very soon."