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What Greenspan Watches

"The Fed is watching a leading inflation index that signals an upturn ahead.

Geoffrey Moore, head of Columbia University's Center for International Business Cycle Research* created the leading inflation index in 1986 to help identify cyclical turns in prices...On February 4th of this year, the day that the Fed ended a five-year long phase of easier credit and hiked short-term interest rates, the CIBCR faxed an alert to its clients warning that the leading inflation index was sending "a very strong signal of inflation ahead."

Prominent among Moore's clients is Fed Chairman Alan Greenspan, whose office would receive the CIBCR's inflation alert early that Friday. Shortly after noon, the Fed raised rates in spite of a report that day suggesting job growth was modest and unlikely to create wage inflation pressures....

After the Feb. 4th policy move the Fed requested additional information on the index from Moore's office. Subsequently the central bank announced four more interest rate increases.

It is interesting to note that Moore, like Greenspan, was a protege of former Fed Chairman Arthur Burns. Is it a coincident that Greenspan launched a pre-emptive inflation strike this year before the economy reached its growth constraints?"

*Please note that the CIBCR was closed in 1996 when Dr. Moore established ECRI.