Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Justa Werkenstiff who wrote (14701)	6/23/2000 1:26:00 PM
From: Justa Werkenstiff	Read Replies (1) \| Respond to of 15132

Fed Is Unlikely to Factor Gasoline Prices in Next Rate Decision Washington, June 23 (Bloomberg) -- The surge in gasoline prices that has sparked a public clamor across the nation won't be a front-burner issue at next week's meeting of Federal Reserve policymakers, economists and Wall Street analysts say. While members of the policy-setting Federal Open Market Committee are likely to discuss the oil-price outlook, the effect hasn't spread far enough through the economy to be a factor in deciding whether to boost interest rates further, analysts say. ``They'll talk about energy this time, but they'll want to wait until they know more about where the economy is headed,'' said Lyle E. Gramley a former Fed governor. ``The meeting in August may be a different story.'' Wall Street economist Henry A. Kaufman agrees. He says if crude oil futures prices start to rise to about $35 a barrel they'll become a major consideration at the panel's scheduled meeting on August 22. Prices for now are apt to have no more than ``a marginal influence'' on policy-making, he said. The oil futures contract for August delivery rose 15 cents, or 0.5 percent, to $32.35 a barrel today. Rising oil costs nonetheless have investors worried that inflation will accelerate, prompting the Fed to raise interest rates further. The 10-year Treasury note fell more than 1/2 point today, pushing the yield up almost 8 basis points to a three-week high of 6.18 percent. The FOMC meets Tuesday and Wednesday to decide whether to raise the overnight bank lending rate for a seventh time in a year. At it's May meeting, the committee raised the rate a half percentage point to a nine-year high of 6.5 percent. Recent reports suggesting the economy is starting to slow have convinced investors the Fed won't raise the rate this time. Central bankers have to wait to see how the oil-price situation where oil prices go from here and how consumers and businesses view the picture in the medium term, said Robert V. DiClemente, an economist at Salomon Smith Barney, Inc. Slowing the Boom If businesses and consumers regard the high prices as temporary, they're likely to pull in their horns and cut back on spending somewhat, DiClemente says -- providing just what the Fed is looking for most: An added drag that will help slow the current boom. If Americans view surging gasoline prices as a harbinger of inflation, it could spur demands for higher wages and cause faster price increases -- giving the Fed more justification to raise interest rates. DiClemente is betting for now that if the current high price level persists, it's more likely to slow the economy than to pump up inflation expectations. He nonetheless cautions that the jury still is out. ``We'll have to wait it out and see,'' he says. One reason to avoid immediate action is that analysts are divided over where oil prices are headed. The Organization of Petroleum Exporting Countries agreed Wednesday to boost its production slightly. At the same time, oil experts don't expect the increase to do much more than hold prices steady. The gasoline-price problem -- particularly in the Midwest -- is more complex. Low Supplies Philip K. Verleger, an energy analyst with the Brattle Group, says much of the current price surge derives from the fact that gasoline stocks nationwide have been low, leaving refiners unable to respond to growing demand when spring arrived. Federal rules requiring refineries to offer motorists lower- emissions reformulated gasoline also have played some part in pushing gasoline prices higher, although they haven't been the determining factor, analysts say. President Bill Clinton expressed apprehension Thursday that the rise in gasoline prices would ``rifle through'' the economy if left unchecked and complained that there was ``no economic explanation'' for the surge. Jun/23/2000 12:54 ET