This week's letter is from Paul Kasriel of The Northern Trust Company. Kasriel is Senior Vice President and Director of Economic Research, responsible for producing the Corporation's economic and interest rate forecasts. He advises the Bank's Assets-Liabilities Committee as well as the Corporation's Investment Policy Committee.
Paul looks at the effect Hurricane Katrina will have on the supply side and the effect the Fed is having on the demand side by raising rates. He thinks that the Fed will hold off raising rates at the next meeting, but that this could lead to "sluggish economic growth with rising core inflation." Now, let's take a look at this week's Outside the Box.
John Mauldin, Editor
Outside the Box
Hurricane Katrina - A Supply Shock Interacts With Preexisting Demand Restraint
Hurricane Katrina is likely to end up being the most economically-disruptive U.S. natural disaster in years. The reason for this is that the nation's energy production has been reduced for some uncertain time and its water freight transportation has been disrupted. The Gulf of Mexico accounts for 30% of our oil production, 23% of our natural gas production and about…