US teeters on the edge

WALL Street is clearly on edge again, after two months when the market had become relatively sanguine over the economic impact of various shocks to the US economy, ranging from higher oil prices to Hurricane Katrina.

Tuesday's market slump in the wake of remarks from Richard Fisher, president of the Dallas branch of the Unisted States Federal Reserve, underscored the return of edginess among traders and investors.

Fisher's remarks confirming that inflation in the US was near the upper boundary of the Fed's comfort zone and that the US economy was likely slowing down really did little more than state the obvious.

Rising energy prices have been pushing up "upstream" measures of price rises for some quarters now, and it was always likely that these would eventually flow through in some measure to the broader price indexes that the US Fed and others watch most closely.

And there have been numerous recent signs that the buoyant consumer spending in the US, which has sustained economic growth over the past few years is finally slowing, although the extent of the slowdown is hotly debated. Not only did Fisher's remarks essentially state the obvious, they were also not the first time that his willingness to speak out a little more frankly than other Fed officials had caught the market's attention.