FT.com / World / US & Canada - Dallas Fed chief warns on inflation

FT.com / World / US & Canada - Dallas Fed chief warns on inflation: "Dallas Fed chief warns on inflation By Krishna Guha in Washington Published: October 5 2007 01:57 | Last updated: October 5 2007 01:57 The president of the Federal Reserve Bank of Dallas has cautioned against ignoring the inflation represented by rising food and energy prices, revealing a continuing debate inside the US central bank over how best to evaluate price pressures. Richard Fisher on Thursday said the increases in food and energy prices over recent years could represent “longer-lived trends rather than transitory blips”. If this was the case “the arguments made for excluding food and energy prices” from core inflation, the Fed’s traditionally preferred measure, “would be on shaky ground”. The Dallas Fed chief cited Bank of England chief economist Charles Bean, who argues that core inflation captures the benefit of globalisation and the rise of China in the form of cheaper manufactured goods, but ignores the cost in terms of upward pressure on food and energy prices. Mr Fisher said he preferred the Dallas Fed’s trimmed mean measure, which excludes only those goods and services that rise most or least in a given month. On this measure, the underlying rate of US inflation is 2.1 per cent year on year, although Mr "