Slide 2 of 5

Notes:

• The first chart shows the relationship between quarterly movements in the world oil price and movements in the rate of inflation of the Consumer Price Index (CPI), measured on a quarterly basis as a percent change from the prior year.

• Viewed from a long-term perspective, CPI inflation tracks movements in the world oil price. Not only do oil and other energy prices comprise a portion of the actual CPI, but downstream impacts on other commodity prices will have a lagged effect on the CPI.

• Even in the past three years, when the world price of oil first fell steadily to about $10 per barrel and then rose rapidly to $20 per barrel (equivalent to WTI $22), CPI inflation has tracked closely.

• Overall, CPI inflation is still very low, principally because inflation in commodities other than energy and agriculture is extremely low. For 1999, the CPI rose by 2.7 percent, while core inflation rose by 1.9 percent, the lowest growth rate since 1965.