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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (115141)	6/9/2000 9:23:00 AM
From: Gopher Broke	Read Replies (1) \| Respond to of 1572505

Ted, Not so sure about it being good news. The core rate us up .2% against a predicted .1%. This was offset by a dip in the headline rate this month, but that doesn't mean inflation is in check. Could have been worse, but it looks neutral at best to me.

To: tejek who wrote (115141)	6/9/2000 12:10:00 PM
From: EricRR	Respond to of 1572505

I think that excluding food and energy from PPI is a mistake. Affected companies use sophisticated derivative and forward hedging strategies to protect themselves from changes in commodity prices. This negates the need to raise sale prices as a risk management tool, effectively breaking the feared "inflation cycle." As has been mentioned on this thread before, "raw" changes in commodity prices (read oil) is by far the biggest determinant of non-asset price inflation. Previously, during the period of rapidly rising oil prices (a few months ago), the "core" rate of inflation lagged behind the inclusive rate. This is is because the hedging payoff and locked in prices protect manufacturers in the short term. Now energy prices have stabilized, but now the core rate growth outpaces the inclusive rate. This is just a carry over from the previous inclusive (oil) rate rise, as new hedges and forwards are purchased at higher underlying prices. Although the Fed can still play a useful role in preventing resource misallocation (read "bubbles"), inflation, as a self-perpetuating phenomena, has lost its bite IMO.