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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (14530)	6/16/2000 2:35:00 PM
From: Wally Mastroly	Respond to of 15132

Fed guy agrees with the Brinkerman <g> ..Rising fuel costs act like tax.. Gas price hike has a silver lining Rising fuel costs act like tax in slowing economy By Dina Temple-Raston, USA TODAY Federal Reserve policymakers and economists see the recent 33% increase in gasoline prices as a temporary blip that won't harm the economy and could help the Fed rein in growth. ''How negatively it will affect the economy depends on how long these rising prices last,'' says Thomas Hoenig, president of the Federal Reserve Bank of Kansas City. ''If this just lasts through the summer, it wouldn't be significant. And we don't expect it to last much longer than that.'' Most analysts predict oil and gas prices will begin to come down around Labor Day, when demand for gasoline traditionally falls. Crude oil trading on the New York Mercantile Exchange closed Thursday up 10 cents at $32.95 a barrel on concern oil exporting countries won't step up production to nourish thin world oil supplies. That's the highest close since oil peaked at $34.13 on March 7. ''Rising gas prices act like a giant tax increase,'' says Dallas Fed President Robert McTeer. ''And that slows the economy.'' Rising gas prices slow the economy because the $5 or $10 extra consumers put in their tanks is that much less they can spend elsewhere. But many experts are betting that the high prices won't last. ''Even those people who predict (oil exporters) will not increase production aren't calling for another doubling of oil prices over the next few months,'' says Carl Weinberg, chief economist at High Frequency Economics. ''Oil will drop out of the inflation calculus by the fourth quarter.'' That's not to say, however, that energy prices haven't taken a toll. Kaiser Aluminum, the third-largest U.S. aluminum maker, is dismissing 400 temporary employees in Washington state because energy costs are forcing it to cut production. Similarly, recreational-vehicle maker Winnebago says rising fuel prices and interest rates are hobbling its business. Those are the signs of a cooling economy policymakers want to see. McTeer says even if policymakers had known in advance about the impending crunch in energy prices, it wouldn't have changed their decision to raise the federal funds target rate half a percentage point last month. ''The risk of inflation picking up is still greater than any downturn,'' he says. Fed policymakers meet June 27-28, and many analysts expect them to leave rates unchanged to see if the economy has slowed sufficiently. Both Hoenig and McTeer see signs of slowing. ''I think there is a moderation,'' says Hoenig, a voting member of the Federal Open Market Committee. ''I have talked to a couple of developers, and they are saying we are seeing a slowdown. Now we have to judge how much of a moderation.''