Oil doesn't have us over a barrel

Having had interest rate hikes from both the Fed and the ECB, most people have settled back to watch the numbers for signs of easing in inflationary pressures. Naturally it's almost impossible to expect any signs of an easing in prospective inflation so soon after a change in interest rate policy, but that doesn't stop people wanting hard evidence all the same.

Of course there have been pressures lately, mainly due to higher oil prices. Oil prices hit the inflation data fairly quickly and, with prices trading between $25 (€24.5) and $30 per barrel, you can see why people are concerned. I'm not all that convinced as to how well-founded those fears are. Certainly, the cutback in supply by the OPEC countries has pushed prices higher - as anyone would have predicted - but that doesn't mean inflation spiralling out of control.

However, higher prices combined with increased demand due to the fact that it's bloody cold at the moment focuses the mind more clearly on energy. It seems that no one has forgotten the dark days of the 1970s when you couldn't walk out of a room without a chorus of "close the door" so that those behind could stay warm from the heat of the one-bar electric fire which cost so much to run.

But economies and the authorities who try to control them were a lot less experienced in the whole gamut of monetary and fiscal policy than they are now. And co-operation between them wasn't as deep. The world, courtesy of cheap technology, is very different now from 1971. (Obviously I speak from research, rather than having been at the cutting edge of monetary policy back in 1971. I was, at that time, struggling with the concept of Venn diagrams and their use in my future life. As I rightly suspected then, they were a complete waste of time.)

Yes, higher oil prices will push inflation up a notch or two. But enough to cause the Fed and the ECB to go nuts and provide a millennium time bomb by way of a series of rate hikes in 2000?

I can see why the Fed might feel the urge to tighten again because wage inflation might be more of a concern to them than oil price inflation and the US labour market is still incredibly tight. Growth in Europe has picked up too - unemployment has finally dipped below 10 per cent - so wage concerns will doubtless start to appear, although it doesn't seem that long ago since the snail-like progress of European economies was of even more concern.

Supply and demand are still the key things for inflation. And the interesting thing about supply and demand at the moment is that although there is plenty of consumer demand, there seems to be an almost limitless supply too. And that competition is keeping prices at very low levels.

Caught up by the whole Christmas thing, I decided that I would do my present-buying at the weekend and so I hauled myself into town. The choice was limitless at almost any price level. If you wanted to go absolutely over the top with no expense spared there were plenty of shops offering you that possibility. But if you wanted to do token present buying (you know, let's spend the money on the kids and forget about the adults this year, only you have to buy something because otherwise you'll look really mean - and now of course you've embarrassed them because they didn't get you anything), well, you could pick up some pretty acceptable gifts for under a tenner. Surprisingly acceptable, in fact!

And, if you didn't want to do the whole Christmas shopping in the city palaver, you could do the whole thing on-line. Most of the bigger bookshops have Web pages from which you can order almost anything they stock - and that includes music or videos as well as books with lots of them offering discounts. You can, of course, opt for Amazon, although the euro-sterling exchange rate knocks the gloss of what would otherwise be bargains.

Anyway, part of my festive moment was losing the run of myself completely and buying loads of scented candles which will, during the holiday season, fill the home with relaxing, stress-reducing aromas. (Last year I bought chocolate-scented ones which, the man informed me, are strictly forbidden this year. Let's just say that chocolate-scented candles cause a hunger-pang for the real thing, and January in the gym is the result). When I got home, I read in the papers that I will be getting a Millennium Candle courtesy of the Millennium Committee. I had, actually, heard about this already but only in a vague kind of way. Then I read the papers and there seems to be mass hysteria about this candle!

Leaving aside the fact that there are complaints that the money could have been spent on something else (couldn't it always?) and the fact that they won't fit through everyone's letterbox (just like the phone book) there were complaints that the enclosed leaflet which, apparently, has a poem by Yeats, doesn't also have a poem in Irish. Isn't it funny that whenever "they" try to make some gesture, even one as mad as sending everyone a non-chocolate scented candle, people will complain about it anyway? I shall light my candle (if it arrives) and it can have pride of place between the cinnamon and the cranberry flavoured ones.

It hardly seems a year since I was reminding my fellow IFSC inhabitants about the annual Christmas collection for the IFSC trust. My good friend, Peter Coogan, who organises all sorts of things for the trust, tells me that the usual collection of goodies will take place before December 16th this year. As with previous years, you can leave a non-perishable gift under the Christmas tree in your company's lobby for collection.

I have now mentioned Christmas in this column for two weeks in a row. I have also given the obligatory New Year mention too. So that's the end of any festive comment from me - next time it's back to supply and demand without any trimmings.

Sheila O'Flanagan is a fixed income specialist at NCB Stockbrokers