PAST TIME TO START CUTTING:

AAA: Gas prices continue to drop (Associated Press, 10/27/06)

Retail gasoline prices fell across the state for the 12th week in a row, according to the AAA Texas gasoline price survey released Friday.

The survey showed the retail price of regular, self-serve gasoline averaged $2.08 per gallon, 2 cents less than last week and 46 cents less than last year. The national average was $2.20 per gallon, also two cents less than last week.

U.S. Economic Growth Slowed in 3rd Quarter (JEREMY W. PETERS, 10/27/06, NY Times)

With the economy shifting into a lower gear, analysts believe that the Federal Reserve will be unlikely to resume raising interest rates any time soon. The Fed paused in August after a two-year campaign of steady increases in its benchmark overnight lending rate, meant to combat inflation. It has kept the rate steady at 5.25 percent through three policy-setting meetings since then, even though the inflation rate has remained stubbornly high.

The majority view at the Fed is that the economy is already on a slowing trend that will bring inflation to heel, and the new report supports that view.

A closely watched measure of inflation in today’s report, the G.D.P. price index, rose at a 1.8 percent annual rate in the third quarter, seasonally adjusted, compared with 3.3 percent in each of the first and second quarters. Falling fuel prices helped bring the rate down.

The Fed raised for too long--it needs to not wait too long to start lowering.

Posted by Orrin Judd at October 27, 2006 4:46 PM