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To: synchro_fan who wrote (8086)	10/15/2000 12:14:02 AM
From: T L Comiskey	Respond to of 65232

Sy....... Fed Official: Oil Prices a Serious Matter PROVIDENCE, R.I. (Reuters) - A Federal Reserve official on Saturday said the run-up in energy costs had to be taken seriously for the U.S. inflation outlook, but he noted that many private-sector observers think oil prices may already be hitting their peaks. ``We have to take the overall inflation rate seriously,'' William Poole, president of the Federal Reserve Bank of St. Louis, said after a lecture at Brown University. It is not enough to just look at non-oil inflation, he added. ``It's clear that oil matters to people,'' Poole said, noting that many people in New England are worried about the rise in heating oil costs. He said the practice many economists have of emphasizing the so-called core rate of inflation, which excludes food and energy prices, stems from a need to strip out sectors that are highly volatile for short periods of time. But over the long term, oil prices can play a role in overall inflation. Asked by reporters if he was seeing much spillover of oil prices to other parts of the economy, Poole responded that there was some evidence of that in shipping costs and air fares. However, he added that it didn't seem very widespread. A jump of 3.7 percent in energy costs fueled the 0.9 percent rise in U.S. producer prices in September. Excluding food and energy, wholesale prices rose 0.3 percent. Both gains beat average forecasts of economists surveyed by Reuters, but Poole said the results appeared to have been anticipated by financial markets. ``Most of it was predicted,'' he said. ``I think that's the way the market took it.'' Poole was also questioned about his forecasts for U.S. economic growth in the near term. He said that he agreed with private-sector economists who pegged it at around 3 to 4 percent. Turning to the subject of recent declines in U.S. stock prices and their potential to crimp growth, Poole said that would affect the economy if it were sustained. However he added: ``what we know about the wealth effect is that it is spread out over time.'' In other words, the impact on the economy of consumer wealth being hurt by stock downturns would not happen all at once. ``If the situation continues, then you would expect to see demand growing a little less robustly,'' Poole said. But he noted that there were other reasons demand might slow anyway, such as the fact that the personal savings rate is standing at the lowest level on record. During his lecture at Brown, where Poole taught before joining the St. Louis Fed, he discussed research he had done showing that financial markets had become remarkably adept at predicting Federal Reserve policy. That was particularly true in the period after 1994, when the Fed became more open about its changes in the federal funds rate, which is what banks charge each other for overnight money. The funds rate influences short-term interest rates throughout the economy and is the Fed's main lever for influencing the economy. ``Most of the changes in the fed funds futures rates are driven by economic news, such as the monthly employment report and the inflation data. A relatively small part of the changes in futures rates comes on days Fed officials give speeches or testimony,'' Poole said. As an example of the accuracy of the predictions, Poole pointed out that interest-rates reflected in federal funds futures contracts had fully priced in the Fed's last interest rate rise, a half percentage-point increase taken in May.

To: synchro_fan who wrote (8086)	10/15/2000 9:57:19 AM
From: Jim Willie CB	Read Replies (2) \| Respond to of 65232

hard to use 1970's as an example OPEC raised oil prices 300% or some such shock do I think the Fed will raise rates? NO, but I think they want to in order to counter the higher energy prices that is the error they WANT to make I dont think the Fed realizes that they will need to LOWER rates in the next 2-3 months, or else face a slowdown somewhat more than they expect... they seem oblivious to the pain in Europe, which is firmly caught in "stagflation" ... Europe has raised interest rates (since US didnt lower) in the midst possible recession the Fed is between a rock and hard place... they want to raise rates to curb spending and growth, and to counter the higher energy costs... but they cannot since that would force Europe into a recession, and possibly us also The Federal Reserve is playing CHICKEN with the US economy... as GregM said, they are dismantling the engines that keep productivity strong and inflation low because they fear growth which they dont understand... namely, growth from the technology crucible the last irony is that late in an economic cycle, inflation shows up briefly as productivity engines are old, tired, and sometimes dismantled... the Fed has typically misread this signal each and every time, raising rates and ushering in a totally unnecessary recession... Greenspan has shown in many speeches that he realizes we are in a truly different situation and era... he has allowed the different engine to run long & hard for a few years... I hope he remains a believer... every speech he makes confirms his growing understanding of the new paradigm... we will see / Jim