A top Federal Reserve official on Monday said the central bank should react if oil prices soar as high as $150 a barrel because prices that high could throw the economy back into recession.
Meanwhile, the White House is considering releasing oil from the Strategic Petroleum Reserve to curb the rapid rise in prices since unrest broke out in the Middle East last month. Within weeks, the price of premium crude has jumped from near $90 to more than $106 per barrel in New York trading Monday.
Although both moves are aimed at easing public consternation over the run-up of prices at the pump to more than $3.50 a gallon on average for regular gasoline, they also likely would rile conservatives in Congress.
The strategic reserve has been tapped only during emergencies, such as the Persian Gulf War, while critics say further easing by the Fed would only stoke oil-fed inflation while doing little to help the economy.
Divisions have emerged on the Federal Reserve Board over what to do, but many members appear to side with Chairman Ben S. Bernanke, who hinted in testimony last week that the central bank might react if oil prices go too high.
Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta, for the first time Monday spelled out what level of oil prices might trigger Fed action, pinpointing the record level around $150 set in 2008. Many economists say those oil prices, along with $4-per-gallon gas, helped throw the economy into a recession.
“Around $150 it becomes a much more serious concern,” he said. “If it plays through to the broad economy in a way that portends a recession, I would take a position we would respond with more accommodation.”
Despite widespread worries that the Fed could stoke inflation by accommodating high oil prices, Mr. Lockhart said inflation is not a problem, especially because wage gains — the biggest cost for most businesses — remain anemic.
That means there’s little risk of a spiral of higher wages chasing prices higher to double-digit levels as occurred after an oil-price spike in the 1970s.
Not all Fed officials agree with that point.
But Mr. Lockhart’s more dovish statement on oil prices closely tracks what many private analysts say: The economy can withstand higher prices up to a point. But any move by oil over $150 per barrel and gas prices more than $4 per gallon could pose a crushing blow to strapped consumers and the economy overall.View Entire Story
© Copyright 2013 The Washington Times, LLC. Click here for reprint permission.
'Your papers, please' must never be heard in America
Independent voices from the TWT Communities
Contributions to the Communities Sports desk from readers.
Empowering mind/body/spirit and health dialogue along with cutting-edge, conscious social, political, and world commentary with Adam Omkara. Join the Evolution!
Born in 1930 in rural Missouri, Charles Vandegriffe, Sr., brings his time and place to the Communities.
Join the Communities and submit your column in response to one written, or on something totally new and unique. We want to hear from you
Benghazi: The anatomy of a scandal
Vietnam Memorial adds four names
Cinco de Mayo on the Mall