INTERVIEW-Dallas Fed economist sees no inflation
By Marjorie Olster
DALLAS, March 7 (Reuters) - A top economist at the Federal Reserve Bank of Dallas sees no signs of inflation in the U.S. economy and no reason to worry about demand outstripping supply.
Harvey Rosenblum, the director of research at the Dallas Fed, told Reuters in an interview late on Monday there was no cause for inflationary alarm in the latest spike in oil prices or in stock valuations.
``I think this is a long boom. I don't see anything in place that's going to change it,' Rosenblum said. ``We are still living in a disinflationary environment. We are pretty near price stability.'
Rosenblum's comments signaled the Dallas Fed is still tilting against the prevalent winds inside the U.S. central bank with its endorsement of a ``New Paradigm', where technology is transforming the way the U.S. economy functions.
Twice last year, Dallas Fed President Robert McTeer cast a dissenting vote against interest rate hikes by the policy-setting Federal Open Market Committee. Rosenblum advises McTeer on policy.
The central bank has raised rates four times since last June and most Fed officials agree now that further rises are needed to prevent an imbalance between demand and supply from driving up inflation and to halt a growing shortage of labor.
But Rosenblum said technology, immigration, more open trade and smaller government are transforming the economy and excess demand could be met, at least for some time, by goods and services supplied by other countries.
``Water doesn't always flow downhill. Sometimes it flows uphill. We have water flowing uphill and we better be able to explain it and have a monetary policy that won't kill the goose that laid the golden egg.'
NO ALARM BELLS ON OIL PRICES
Rosenblum sees the latest spike in oil prices as temporary. He noted the U.S. economy was less sensitive to energy costs now than in the 70s and 80s and that prices, by historical standards, were still not high.
Oil prices rose to fresh nine-year peaks on Tuesday with Brent crude topping $30 a barrel for the first time since the 1991 Gulf crisis.
``It's a concern but not an alarming concern. It's not a clear and present danger to the U.S. economy,' he said.
``The world economy has gotten stronger and the U.S. economy going full tilt will make oil prices stay up longer than usual. In that sense, I would find it worrisome.'
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