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To: GVTucker who wrote (126406)	2/1/2001 9:57:22 AM
From: Road Walker	Respond to of 186894

GV, re: Core inflation (ex food and energy) was 2% in 1999. It was 2.7% in 2000. In 4Q 2000, for the first time in almost 7 years, the GDP deflator was greater than the GDP. Inflation hit an inflection point in 1999, and has been rising ever since. My biggest worry is that inflation continues to accelerate, and makes this slowdown much, much worse. There is where our biggest risk is, by far. Core inflation get's influenced by energy prices, with pass through price increases. And part of the reason the deflator was greater than the GDP, was that the GDP growth was so low. Yes inflation is increasing, but it is still low. And yes, I agree it is the most dangerous risk. It's fortunate that inflation is so low, if it were higher the Fed wouldn't have the freedom to act on interest rates. The FOMC said inflation is contained (for what that's worth). John