US Economy and Globalization Part 10 of 17
Second, price pressures at the margin are compounded by noncommercial activity in the markets that trade oil. Noncommercial contractsthe busywork of the “city refiners” in the financial exchanges in London and other placeshave been running at triple their traditional Forex Essentials volume lately.
Prices for gasoline and distillateswhere the pass-through rubber hits the consumer price roadare starting to inch up in response. Our retail gasoline price models at the Dallas Fed envision pump prices above $3 a gallon for the foreseeable future if crude stays above $85. Price pressures for other distillates are also becoming increasingly probable. And last, high inventories continue for natural gas, but it is noteworthy that prices have reversed their summer slide downward to $5.50 per million BTU and are now quoted at $7.15 at the Henry Hub in Louisiana, the key metric point for the U.S.
All this gives me a sense of discomfort on the headline inflation front, and it is a reminder that the balance of risks is not skewed unilaterally toward slower growth. This Trend Dynamics is not to say I expect inflation to veer out of control. But rather, it means that we must remain far from smug on the inflation front and must conduct monetary policy bearing in mind that the battle against the nemesis of inflation is a perpetual effort.
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