How the Forecasters Fared

here is a reprot card of the forecasters.

HOW THEY FARED Economist Allen Sinai took the top rank among forecasters for the first half of 2006. See details in a related article. Forecasts from survey conducted June 9-26, 2006. Actual numbers as of June 2006.		GDP : Avg. Q1 2006 For: Avg. Q1 2006 Closest forecasts: Gene Huang (4.7%) David Lareah (4.7%)		CPI : May 2006 For: May 2006 Closest forecast: Michael P. Niemira (4.3%)		Jobless Rate : May 2006 For: May 2006 Closest forecast: James F. Smith (4.6%) blank
Three-Month Treasury Bill : June 30, 2006 For: June 30, 2006 Closest forecast: Lou Crandall (5.00%) J. Dewey Daane (5.00%) D. Malpass/J. Ryding (5.00%)	10-Year Treasury Note : June 30, 2006 For: June 30, 2006 Closest forecast: Allen Sinai (5.14%) blank blank	Dollar vs. Euro (in dollars) : June 30, 2006 For: June 30, 2006 Closest forecast: Nariman Behravesh (1.26) John Silvia (1.26) Allen Sinai (1.26)	Dollar vs. Yen : IJune 30, 2006 For: June 30, 2006 Closest forecast: Four-way tie (¥114)

US Inflation & Interest Rates reaching new highs

An interesting and postitive article from the Journal on US Economy, Inflation & Interest Rates. Looks like we'll see a lot more of Bernanke in action.

By MARK WHITEHOUSE

July 4, 2006 6:13 p.m.

In recent months, U.S. consumers and investors alike have suffered unpleasant surprises as prices on everything from gasoline to apartment rents have jumped. But the worst may be yet to come, says the top-ranked economist in The Wall Street Journal's latest forecasting survey.

For several years, Allen Sinai, chief global economist at Boston-based consulting firm Decision Economics, has argued that the current expansion -- with global demand pushing up oil prices -- looks a lot more like the classic business cycles of the 1970s and 1980s than the exceptional one of the 1990s, when various factors -- from the peace dividend to globalization -- helped keep inflation in check. In December that conviction led Mr. Sinai to forecast that consumer prices would rise sharply in the first half of 2006 and wind up 3.5% higher in May 2006 than a year earlier.

The actual year-over-year inflation number hit 4.2% as of May, higher than any of the 56 economists in the survey had imagined, making Mr. Sinai's aggressive forecast among the most accurate. "Inflation sneaks up on you like a cancer," says Mr. Sinai. "When you begin to see signs of it, it's already in the system and in motion." His guess that the bond market would react to higher inflation by pushing the yield on the 10-year Treasury note up to 5.14% by June 30 -- the actual number was 5.15% -- clinched him the No. 1 spot.

Now, Mr. Sinai thinks inflation will likely begin to feed on itself, as workers and suppliers demand higher wages and input prices, and companies pass those cost increases on to consumers. As a result, he expects the Federal Reserve to slam harder on the brakes, increasing its target for short-term-interests from the current 5.25% to 6.25% by mid-2007, a level that no other economists think likely, and that many believe would be high enough to trigger a recession.

Mr. Sinai, however, says not to worry. He thinks higher interest rates won't seriously crimp companies' ability to get funds for investment, allowing the economy to expand well into the election year of 2008. "All things considered, the U.S. and global economies are doing quite well," he says. He expects growth in U.S. real gross domestic product to average almost 3% in the second half and about 2.7% in the first half of 2007.

Inflation and GDP growth proved the two toughest targets to hit among forecasters who participated in the December survey, and consequently became the most-important factors in the rankings. A high estimate of first-quarter GDP growth -- 4.7% compared with an actual 5.6% -- won second place for Gene Huang, chief economist at FedEx Corp. Maria Fiorini Ramirez of the eponymous consulting firm, Peter Hooper and Joseph LaVorgna of Deutsche Bank Securities, and Mickey Levy of Bank of America Corp. made the top five largely by getting in the ballpark on inflation and GDP.