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Strategies & Market Trends : Can you beat 50% per month? -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (7804)	2/18/2005 12:25:33 PM
From: Smiling Bob	Read Replies (2) \| Respond to of 19256

Double digit inflation is lurking Wholesale Prices Climb, Raising Concerns Friday February 18, 11:59 am ET By Martin Crutsinger, AP Economics Writer Wholesale Prices Rise 0.3 Percent in Jan.; Move May Lead Federal Reserve to Raise Interest Rates WASHINGTON (AP) -- Wholesale prices rose 0.3 percent in January, driven up by big increases in the cost of new cars, cigarettes and alcohol, a development that could lead the Federal Reserve on a path toward steeper interest-rate increases. ADVERTISEMENT The Labor Department said Friday the increase in its Producer Price Index, designed to track price pressures before they reach the consumer, reversed a 0.3 percent decline in December. Widespread increases in a number of areas drove the core inflation rate, which excludes food and energy, up by 0.8 percent, the biggest increase in this area in more than six years. The big jump in the core rate of inflation was four-times the modest 0.2 percent advance that economists had been forecasting. They said if there were further sharp increases and if consumer prices also begin to rise more rapidly, this would certainly raise inflation concerns at the Federal Reserve. "The core figure was a little scary," said David Wyss, chief economist at Standard & Poor's in New York. "This is probably a one-time pop but we will have to watch carefully." On Wall Street, stocks took the inflation news in stride with the Dow Jones industrial average up about 2 points in late morning trading. However, heightened inflation worries rattled the bond market, pushing yields on Treasury's benchmark 10-year note higher. The Fed has been raising short-term interest rates at a gradual pace since last June in an effort to ensure inflation does not get out of control. Federal Reserve Chairman Alan Greenspan told Congress this week that the central bank was on guard against the possibility that a rebounding economy could trigger stronger inflation pressures. However, he said that as of now Fed policy-makers were seeing no worrisome signs of a breakout in inflation. If inflation pressures began to mount, the Fed would respond with faster interest rate increases than the gradual quarter-point moves it has been making, an action that would quickly translate into higher borrowing costs for consumers and businesses. The big 0.8 percent jump in core inflation last month, the largest advance since a 1 percent surge in December 1998, was led by a 3.4 percent increase in the price of cigarettes. That was the biggest spike in tobacco prices since a 4.4 percent jump in April 2002. The price of alcoholic beverages climbed 2.8 percent, the biggest one-month jump in nearly five years. Prices for new passenger cars were up 1.2 percent, which was the biggest one-month increase since March 2003. Energy costs, which last year served to push overall inflation higher, actually retreated again in January, dropping by 1 percent, following an even bigger 2.5 percent drop in energy prices in December. The January drop reflected a 4.2 percent decline in gasoline and a 1.8 percent drop in natural gas prices which were offset somewhat by an 8 percent increase in home heating oil and a 1.2 percent rise in electricity prices. Food costs were down 0.2 percent in January, the best showing since a similar 0.2 percent drop in food prices last August. The decline, which followed a 0.1 percent rise in December, reflected falling prices for vegetables, fresh fruits and eggs. Prices for coffee and beef rose last month. The 0.3 percent decline in wholesale prices in December had originally been reported as a bigger drop of 0.7 percent. However, the overall figure and the component price measures were all readjusted to reflect the use of updated seasonal adjustment factors.