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To: Les H who wrote (10889)	7/26/2004 10:07:02 PM
From: Les H	Read Replies (1) \| Respond to of 29597

Nasdaq 100 Pct Above 50 MA stockcharts.com

To: Les H who wrote (10889)	7/27/2004 10:49:52 AM
From: Les H	Read Replies (1) \| Respond to of 29597

High oil prices raise risk that Fed may have miscalculated Bloomberg WASHINGTON – US Federal Reserve Chairman Alan Greenspan says the past year’s rise in the price of oil, gasoline and industrial commodities should prove “transitory,” enabling the Fed to raise interest rates gradually and curb inflation without smothering the expansion. Investors disagree. Futures markets are pricing oil for delivery in 25 months at almost US$35 a barrel, up from the $25 that energy analysts were predicting a year ago. “The prospect that oil prices are likely to remain that much higher worsens the tradeoff faced by the Fed and other central banks around the world,” said Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas. The expectation for continued high oil prices is heightening the inflation concerns of economists including Stephen S Roach at Morgan Stanley in New York, who says the Fed should have begun raising interest rates sooner and faster. The Fed boosted its benchmark overnight interest rate by a quarter of a percentage point to 1.25 percent on June 30, the first increase in 49 months. The rate should be higher to close the gap between borrowing costs and inflation and prevent “asset bubbles,” Roach said. “The Fed is still 2 percentage-points behind the inflation rate in terms of its overnight policy instrument,” he said. “It’s really rolling the dice with financial markets,” and “that’s the height of irresponsibility for a central bank.” Underestimating inflation could have political ramifications. Democratic presidential candidate John Kerry, 60, a four-term US senator from Massachusetts, has criticised Republican President George W Bush, 58, because wage increases have failed to keep up with inflation. Polls taken by the Gallup Organization show inflation worries have restrained consumer confidence and kept Bush from getting a higher approval rating for his handling of the economy, Gallup Editor-in-Chief Frank Newport said. The percentage of people who believe inflation will accelerate rose to 62 percent in July from 59 percent in April, and the proportion who expect interest rates to climb jumped to 78 percent from 29 percent, he said.