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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Robert Douglas who wrote (2777)12/29/2000 4:11:25 PM
From: Henry Volquardsen  Read Replies (1) of 3536
 
Robert,

one possibility that I'll offer that may modify the need for rate cuts is the price of oil. It has been my belief that over the last year oil price increases have not been a response to inflationary pressures but to supply/demand pressures. As such the price increases have had the effect where x$ increase equals 1/4 point rate hike. Therefore when the Fed raised rates they were not tightening to much but the subsequent oil price increase has acted as if they had continued hiking rates. Recently oil prices have begun to drop in response to economic slowing and will likely continue. Since we are therefore getting an ease from oil prices already less of a rate cut may be needed. Just a theory.

Henry
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