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| Fears that oil price is fuelling inflation | |
| 2004-05-07 | |
| Central bankers around the world raised concerns about the inflationary impact of higher oil prices on Thursday as crude rose to nearly $40 a barrel in New York - its highest level since October 1990. Oil prices have risen by 22 per cent this year. Traders fear tight supplies will be even further stretched by rising tension and attacks in the Middle East. World equity markets retreated in response to inflation fears and the prospect of rising interest rates. The Dow Jones Industrial Average had fallen by just over 1 per cent at mid-session on Thursday. In the UK the Bank of England pointed to the need to keep inflation under control as a reason for raising its main interest rate by a quarter-point to 4.25 per cent on Thursday. In a statement explaining its decision the Bank’s monetary policy committee cited sharply rising commodity prices. Although the European Central Bank kept rates on hold at 2 per cent, Jean-Claude Trichet, its president, adopted a more hawkish tone towards price rises. He warned that increases in oil prices might pose "an upside risk to price stability" and that Eurozone inflation could rise above 2 per cent over the next few months. Last week Alan Greenspan, chairman of the US Federal Reserve, warned that the "dramatic" rise of oil and gas futures was "an economic event that can significantly affect the long-term path of the US economy". Earlier this week Mr Greenspan signalled that US interest rates would be raised soon, prompting speculative investors to start to reduce their risks. As a result, emerging market bond prices on Thursday suffered their worst one-day losses in nearly two years. JP Morgan’s EMBI+ emerging debt index was down 2.2 per cent as European markets closed, the biggest one-day decline since July 2002. John Bates, analyst at West LB, said: "There was an irrational stampede to get out - there were only sellers in the market." Tony Blair, Britain’s prime minister, said he had spoken to oil-producing countries about the impact of higher oil prices. Mr Trichet also repeated his recent call for oil-producing countries to exercise "responsibility" on the price of oil. "It is is a matter of importance," he stressed. However, an Organisation of Petroleum Exporting Countries official said there was nothing the oil cartel could do to reduce the soaring crude price. Hossein Kazempour Ardebili, Iran’s representative on Opec’s board of governors, told Dow Jones newswires that security fears in the Middle East and the tight US petrol market had created a $6 a barrel premium in the oil price. Opec, which accounts for about one-third of global oil output, quashed market rumours of an emergency meeting when an official said there were no plans for a meeting before the next scheduled gathering in Beirut on June 3. Oil prices have risen about 5 per cent since Saudi militants attacked western expatriates at a petrochemical plant at the weekend.
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| Posted by:Mark Espinola |
| #3 Lucky, it's good if you're selling, not so good if you're buying. LOL |
| Posted by: rkb 2004-05-07 10:27:23 AM |
| #2 Should'a brought real estate instead of Netscape. Oh well, I'll buy real estate now. |
| Posted by: Shipman 2004-05-07 7:38:51 AM |
| #1 Just some insight about inflation that may be of interest to you. In So Cal my brother, a good man, sold his 1100 sq ft home in Garden Grove, a city not far from Disneyland, a beach city tho not beach side, a stucco box in a grid of 1100 sq ft stucco boxes circa 1961 and tucked between two freeways, for $310,000. This home sold new prolly for $4597.98 He moved to an area, Lake Elsenor, many miles ESE away from the beach cities of Orange County. He bought a new 3 bdrm, 3 bath ranch in a new development for $325,000. His next door neighbor, who had been living there for less than a year put his similar house on the market and it sold for over $500,000. Now what does this mean. A home out in the distant burbs of Orange County (actually Riverside County, a place currently on fire) had an increase of value of about $200,000. Good work if you can get it. I'm hoping that the Cal burp comes north to the Evergreen state. It has in the past. Come on ice cream. |
| Posted by: Lucky 2004-05-07 1:19:29 AM |