Teri, Kumar, and All:
I suspect that there will be more upward revision after they have done their buying! In any event, as far as this weeks FOMC goes, I would say there is about a 50/50 chance that the FED will move rates up 25 basis point... here is an article:
Experts Differ on Need for Higher Rates
WASHINGTON (Reuter) - Proponents and opponents of higher interest rates squared off at a panel discussion Friday,
although most agreed that the Federal Reserve was not likely to tighten credit at a policy-making meeting next week.
"The chances are less than 50-50 they will," former central bank governor Lyle Gramley said.
But he, like several other panelists at the Economic Strategy Institute discussion, said it was a tough call.
The central bank's policy-making Federal Open Market Committee meets on Tuesday to consider whether to raise short-term
rates for the second time in three months.
At its last meeting on March 25, the Fed raised rates for the first time in more than two years, bumping them up a quarter
percentage point to 5.5 percent.
Gramley, now a consultant at the Mortgage Bankers Association, said the Fed would eventually need to boost rates because
the economy is growing too quickly for its own good.
"If we continue to grow at a pace well-above long-term growth potential, we're going to get into problems," he said.
The economy grew at a 5.6 percent annual rate in the first quarter, its fastest pace in more than nine years. Although growth is
likely to slow to about a 2 percent pace in the current quarter, it will pick up again later in the year, fueled by a strong stock
market, Gramley said.
Charles Lieberman, chief economist at Chase Securities Inc., agreed that the Fed should raise rates further and would
eventually do so, but that it was unlikely to act on Tuesday.
"The U.S. labor market is tight," Lieberman said. "We are getting to a point where we are starting to generate upward pressure
on labor costs."
The unemployment rate fell to 4.9 percent in April, its lowest level in more than 23 years. Higher wages would eventually feed
through to higher inflation if they were not matched by increases in worker productivity.
"The Fed should tighten," said Michael Lewis, president of Chicago-based economic consultants Free Market Inc. He said he
sees short-term rates rising eventually to close to 7 percent.
But other panelists saw no need for higher rates.
Lawrence Kudlow, chief economist at American Skandia Life Assurance Co. of Connecticut, said he saw no signs of inflation
picking up. Precious metal and commodity prices have been well behaved and the dollar is relatively strong.
"There is no need for the Fed to raise rates," he said.
James Annable, chief economist at First Chicago NBD, argued that "management anxiety" was holding down inflation and was
likely to continue to do so.
With shareholders more aggressive and takeovers more prevalent, corporate bosses are afraid of losing their jobs if they do
not boost profits. Their response has been to trim payrolls, cut benefits and hold down wages, Annable said.
Dean Baker, of the Economic Policy Institute think tank here, said that wages for most workers were just starting to pick up --
and that was no reason to raise interest rates.
"We went from a yuppie recovery to a people's recovery," Barker said, arguing that only the upper echelon benefited during
the the first five years of the current six-year-old economic expansion. |
