Surging Energy Prices Could Boost Inflation Rate

ByJohn S. McClenahen The prospect of higher than initially expected inflation in 2002 probably won't have the U.S. Federal Reserve tightening the money supply until possibly some time in the second half of this year. However, prices of crude oil have been surging this spring, with retail gasoline prices in late April some 29 cents (about 27%) higher than they were in January, notes Maury Harris, chief economist at UBS Warburg, New York. "Unless there is a significant reversal of recent energy price increases, overall CPI [Consumer Price Index] inflation in 2002 could be close to our forecast of around 2.8% -- versus our earlier 2% forecast for 2002," says Harris.