Will Falling Fuel Prices Energize the Economy?

Chart of the Week for July 13-19, 2001

Consumers and businesses have been feeling the effects of higher energy costs as prices of oil, gasoline, and natural gas have risen sharply over the past year. Rising energy costs pose two threats to the economy: inflation and reduced consumption. Fortunately fuel costs have fallen lately, especially for natural gas, as production and supplies have increased. Lower energy prices help the economy by increasing consumers’ discretionary income and providing the Federal Reserve with flexibility for future interest rate reductions.

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