U.S. Inflation Is On The Way Down

By John S. McClenahen Based on its proprietary composite index of seven indicators, UBS Warburg, New York, a unit of UBS AG, is forecasting a continued decline in U.S. inflation. "We expect CPI inflation to slow from 3.7% last year to around 2.8% this year and 2.5% in 2002," says Maury Harris, UBS Warburg's chief North American economist. In June, UBS Warburg's index fell a further 0.4%, its 13th decline in the 15 months since it peaked in March 2000. The weak U.S. economy and a strong U.S. dollar have combined to hold down the prices of non-food and non-energy goods, the so-called core commodities, notes Harris. That's partially offset an increase in prices of non-energy services. "Looking ahead, a likely rising unemployment rate to around 5% before yearend should help to trim wage gains in some labor-intensive service sectors," Harris contends.

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