Why the inflation bulls may be half right

Article Abstract:

Some observers believe that US inflation will not remain very low for the foreseeable future. However, their views are generally not being taken very seriously, as it has been common in the past for inflation to be overestimated. Research undertaken by economists at the Federal Reserve Bank of New York indicates that the causes of low inflation do not lie in product markets, as companies have not changed their approaches to pricing. The research goes against the widely-held view that low inflation has been the result of international competition forcing companies to keep prices low.

Prices, Forecasts and trends, Inflation (Finance), Inflation (Economics)

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Wall Street: rate cut relief

Article Abstract:

US equities have performed well despite earnings reports for 3rd qtr 1995. Concern is focused on interest rates and other economic factors. Inflation has remained subdued despite a drop in unemployment to under 6% for 12 months, and some analysts argue that the labor market has changed. Subdued inflation means that a drop in interest rates is more likely. Consumer spending growth is likely to revive in 1996, according to Goldman Sachs, which sees less scope for interest rate cuts.

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US: best of the big

Article Abstract:

Wall Street has performedbetter than other large equity markets according to Barton M. Biggs from Morgan Stanley. Bearsargue that low dividend yields and high price to book levels are dangerous. Bear markets havefollowed other occasions when this has happened. Biggs argues that cost reductions andrestructuring are allowing US firms to generate large cash flows which are being used torepurchase stock or make acquisitions. The US bull market may thus have not ended, heargues.

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