BNSF CEO sees more inflation than Fed

NEW YORK (Reuters) - The head of Burlington Northern Santa Fe Corp. (BNI.N: Quote, Profile, Research, Stock Buzz), the second-largest U.S. railroad, said on Monday he sees more signs of inflation in the economy than the U.S. Federal Reserve.

"I believe there is a lot more inflation out there in the market than the Fed is seeing," said BNSF Chief Executive Matthew Rose, citing higher energy and commodity prices.

In spite of tame government inflation data, which has led the Federal Reserve to signal a pause in its nearly 2-year cycle of interest rate increases, Rose said there are signs of inflation across the economy.

"We're seeing inflation -- whether it's health care or commodity pricing -- it's there," said Rose at the Reuters Manufacturing and Transportation Summit in New York.

Rose said rising energy costs are "a double-edged sword."

"For our coal business it's fantastic .... More and more coal is wanting to be burned, so that's been a benefit," Rose said, citing the company's contracts for transporting coal.

But the company, which uses about 1.4 billion gallons of diesel fuel a year -- making it the third largest U.S. consumer of diesel fuel after the U.S. military -- has had to implement fuel surcharges to stay profitable in the face of higher oil costs.

"It's imperative that the railroads have a surcharge because we have to maintain our profitability for capital investment," Rose said.

Railroads are also facing high commodity costs for steel, copper and aluminum -- key resources used to make and maintain rail cars and tracks.

"The rise in commodity prices has been a change that we haven't seen in the past 10 years," Rose said.