Federal Reserve & Interest Rates

The price of gas is getter closer and closer to $4 per gallon.  Light, sweet crude oil jumped to $118.05 per barrel today, and that means gasoline costs are not going to get any cheaper for a while.  With the economic conditions the way they are, saving money is crucial.  Here are some tips on improving your gas mileage and saving on gasoline costs.

Control your speed without so much braking.  Your gas burns up faster whenever you accelerate too much and then brake.  It is better to reduce your speed, lift your foot from the gas pedal, and only brake when you absolutely need to.  Driving slower (which most people are to much in a rush to do) will save you gas as well.

If you have cruise control, use it if there isn’t too much traffic.  The less you use your gas and brake pedal, the more efficient your gas mileage will be.  Try to use a slightly slower speed than you normally drive (again, applying the driving slower tip).

Don’t waste your gas on air conditioning. If you are in a very warm climate, that might not be an option for you, but you can cut back by turning of the air conditioner a few minutes before you get where you need to go.  Your car should already be cool enough to keep you from burning up for those last five minutes.  If you are making a short trip, and the weather isn’t too hot, just don’t turn it on.

Top off your gas tank.  Your fuel burns more quickly when the tank is not full.  Waiting until you are almost on empty can actually cost you more, and you will really feel the rise in prices that way.

Check your tire pressure.  Your fuel economy is affected by the level of your tire pressure.  Make sure they are filled to the right pressure.

Obvious ways to save on gas include driving less and carpooling.  You can combine errands that require trips (like the bank, grocery store, and post office) and save on the trip back and forth from home to each individual place.

These tips should help you cope with the spike in the price of oil.  It is good to save where you can.

The latest economic data has revealed that both the Producer Price Index (PPI) and the Consumer Price Index (CPI) have gone up, in addition to the price of oil reaching record heights.

The PPI was released yesterday by the Department of Labor, showing an increase of 1.1%, seasonally adjusted.

The CPI rose 0.3%, seasonally adjusted.  From September to January, there was a total increase of 2.8%.  The steady consumer price increase paused last month, and last month’s increase adds up to a 3.1% rise in prices since September.

The price of oil spiked up to higher than $114 per barrel.  This record high of oil costs will begin to reflect in gasoline prices even more in the coming months.  The demands on gasoline in the warmer months will escalate the prices.  The decreasing value of the dollar is also contributing to rising oil prices.  Heating oil is also affected, but thankfully the weather is getting warmer.

The euro is rising to nearly $1.60.  Import costs will truly begin to take a toll on our already slipping economy.  Experts say that is the weakening of the dollar that is driving the price of oil higher.  The trade value of the dollar is not getting better, and the continued interest rate cuts are keeping the dollar from gaining strength.

Further rate cuts are expected nonetheless, which will mean more price increases, and continued dollar weakness.  The United States Federal Reserve is much more concerned with preventing a total credit crunch and maintaining liquidity in the financial markets.  Stimulating economic growth with liquidity injections and loosening credit with rate cuts is also taking away from the value of the dollar and escalating prices, especially for commodities like food and energy.

Is there an end in sight?  It will take the rest of the year to find out whether or not the recent moves were the right ones.  Will the economic stimulus package boost consumer spending as the government hopes it will?  That will take several months to find out as well.  Hopefully something will prove to be effective in helping to improve our economy.

On a global scale, food and energy costs have gone up, and it is starting to arouse concern in the minds of the finance leaders around the world.

World hunger continues to be a problem.  Many people are already aware of the millions of people who suffer starvation in many countries around the globe.  The cost of food has gone up even more in recent months with all of the tightening financial conditions in the United States.  Global economic difficulties stemming from the housing correction in the U.S. all have an effect on inflation in other countries.  World financial leaders are concerned that the poverty and hunger crises will worsen as a result of the already prolonged economic struggles.

While a majority of Americans are able to eat on a regular basis, there are still hungry people, even on the lands of the rich United States.  The problem of hunger is an incredibly harsh reality for those in other less blessed countries, particularly on the continent of Africa.

Energy costs are of course a major problem for penny pinching families in the United States, but at least many of these families have food even if they can only afford to get half of a tank of gas for their car.

The International Money Fund (IMF) and the World Bank are having a conference this weekend to address these and other pressing issues on the global economy.  Among the 185 nations represented, our own Treasury Secretary Paulson is active in these discussions.  He offered his comments on a need for some reform:

…IMF needs to sharpen its focus on: 1) exchange rate surveillance; 2) openness to international investment, particularly meeting policy challenges posed by sovereign wealth funds; and 3) supporting global financial market stability.  The Fund must also maintain its capacity to provide balance of payments support to countries in crisis, and to promote macroeconomic stability in low-income countries, while avoiding straying into the World Bank’s development mandate…

Secretary Paulson also made mention that the U.S. is making “vigorous” efforts in assisting the economic situation.