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The Honolulu Advertiser
Posted on: Monday, July 18, 2005

Inflation pressures up, survey suggests

By Andrew Ward
Bloomberg News Service

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The U.S. economy is growing at a "solid" pace, causing inflation pressures to mount, according to a quarterly survey by the National Association for Business Economics of its members.

Most of the economists, 60 percent, said gross domestic product will expand by more than 3 percent in this year's second half. Hiring plans also increased. At the same time, an index of prices charged by member companies rose to a nine-year high.

"Conditions are pretty good, and the economy is prospering," said James Meil, chief economist at Eaton Corp. in Cleveland and co-author of the report. "If there is a ... warning in the survey, it shakes out on the inflation front."

The assessment reinforces expectations among economists in other surveys that Federal Reserve policy makers will keep raising the benchmark U.S. interest rate to keep inflation in check. Today's survey found that corporate economists were concerned about the risk of the Fed raising rates too much. Terrorism, oil prices and hedge funds also were sources of risk.