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US Economy and Globalization Part 9 of 17 |
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Last Updated ( Thursday, 22 January 2009 )
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| on January 22, 2009 09:36 AM |
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1.As Australians, you know better than anyone about the dramatic increase in milk prices, to say nothing of grains and other foodstuffs that go into feeding any Power Principles creature that walks on two or four legs. This is hardly encouraging, given that these price increases are occurring against a ramping up of the caloric and protein intake of a few billion new eaters in China, India and elsewhere. All told, it injects a modicum of doubt about the wisdom of predicting further significant declines in inflationary pressures.
Energy price dynamics further cloud the picture. If you talk to any of the major and independent oil companies, they will tell you they have no problem in finding oil or refining it or delivering final products. They will note, however, two key impulses that are at work:
First, they see no evident slowing in the growth of demand for energy in the U.S. The energy appetite in the BRICsthe big, fast-growing nations of Brazil, Russia, India and Chinais voracious, and they are only part of the developing world. An enormous amount of chemical plant infrastructure and capacity is being constructed everywherefrom the U.S. Gulf Coast to the Middle East to China and
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Challenges for Monetary Policy Part 12 of 14 |
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Last Updated ( Thursday, 22 January 2009 )
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| on January 22, 2009 07:35 AM |
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The brow of a central banker considering further accommodation furrows further when looking at the inflation measures that form the basis for Main Streets inflationary expectationsthe CPI and the Personal Consumption Expenditures (PCE) deflator. On a 12-month basis, the most recent CPI, released yesterday, was running The Forex M.o.d. System - Merchant of Death at a rate of 4.1 percent. The last PCE deflator, released in December, was 3.6 percent. The Trimmed Mean PCE Deflator, which the Dallas Fed tracks in an effort to eliminate noise from signal and as a basis for projecting inflation, is no longer trending downward. Even the so-called Core PCE, which I personally consider least useful because it eliminates food and energy prices, is rising rather than declining.
Of course, what matters most is the future direction of inflation, not the past. In the course of preparing for each FOMC meeting, I regularly consult directly with some 30-plus CEOs to develop a sense of future business activity, including cost and pricing developments. I have found this rigorous exercise to be extremely helpful in placing our staffs econometric analysis in Supreme Trading System context as I have prepared for FOMC meetings in the past,
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