Statistics give mixed signals on economy

The week ahead

November 12, 1990|By Chicago Tribune

Depending on which indicator you follow, inflation is virulent or it has disappeared. Consider last month's wholesale price report. It said overall prices rose 1.1 percent, an unacceptable level by any measure; but when oil and food prices were excluded, there was no inflation at all. The quandary for the Federal Reserve is which yardstick to believe. If inflation is gone and the country is staggering toward recession, the answer would be clear: Let interest rates fall and put the economy back on track. But if inflation is still swallowing up fixed incomes and pensions, the Fed should leave monetary policy alone. More data on which to hang a decision will arrive Friday, with the report on consumer prices for October.

WATCH FOR: Another anxiety-fostering leap, with the consumer price index for the month galloping forward 0.7 percent. Anything near that or higher will prompt the Fed to hold interest rates where they are.

AFTERTHOUGHT: Many analysts are betting the Fed's Open Market Committee, which meets tomorrow, will notch rates lower. The economy is weak enough that interest rates are likely to slip for the next year, says Lawrence Kudlow, economist with Bear, Stearns & Co. Kudlow, scoffs at most gloom-and-doom predictions and believes long-term rates will dip to around 8 percent from their current 8.6 percent level.

NEXT UP: The Federal Reserve tomorrow reports industrial production for October.

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