Dow's Inflation Fears Are Probably Inflated

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NEW YORK: It probably won't be a Black Monday, but after Wall Street's market movers get through stewing in their juices this weekend, expect something like charcoal gray. The Consumer Price Index was way up Friday -- the 0.7 percent hike was the biggest since the Gulf War -- and by close of day the Dow had shed 194 points. Now investors have two days to read the papers, look ahead to the Fed's interest-rate confab Tuesday and wonder: Is the best news on inflation behind us? And more important, does Alan Greenspan think so?

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TIME senior economics reporter Bernard Baumohl doubts the Fed will act Tuesday; Greenspan will probably settle for a gentle reminder that he's keeping an eye on inflationary pressures, just like always. And that should be enough. "All the worrying today about inflation is probably excessive," he says. "This spike in prices is mainly due to OPEC nations' production cuts in March, which they've been abiding by for once. May's numbers should be back to a comfortable level." Of course, other factors bear watching -- from signs of an economic recovery in Brazil, Thailand and South Korea that could increase oil demand to NATO's ongoing war in Kosovo, which is sucking down fuel like lemonade in summertime. But Baumohl says the markets are jumping the gun -- and are just plain jumpy. "There'll be uncertainty and sell-offs until the Fed announces on Tuesday," he says. "But after that, the Dow will go right back to setting records." That may be the only kind of inflation you really have to worry about.