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Strategies & Market Trends : MDA - Market Direction Analysis

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Nov 21 4:00 PM EST

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To: Les H who wrote (23408)	8/19/1999 6:12:00 PM
From: Les H	Read Replies (2) of 99985

FEDWATCHERS: 25BP AUG HIKE CERTAIN; UNCERTAIN THEREAFTER By Nikki Baldwin NEW YORK (MktNews) - Fedwatchers at U.S. primary dealers expect the Federal Reserve to raise interest rates 25 basis points to 5 1/4% and keep the bias at neutral at Tuesday's meeting. Fedwatchers pointed to wage pressures and the threat of emerging inflation for the hike. Twenty-five of the 26 dealers who responded called for the 25 point hike, with one, John Ryding at Bear Stearns, calling for no rate action. Many said a 25 point hike would help dry up some of the excess liquidity added late last year, noting that a second hike in October would be necessary to even things up. The majority said Aug 17's consumer price and industrial production data, both mostly as expected. will not have an effect on the Fed's decision. Most said discussion of the bias, unlike the past two meetings, will not be material this time, neither will the discount rate. Unlike expectations for June's FOMC meeting, Fedwatchers expect the Fed to announce its actions, though it won't hold as much suspense as in June. Asked whether Y2K problems will play a part in the Fed's thinking, most feel the problems will not be as big as once thought. They believe the Fed will avoid tightening just before the end of the year to eliminate any disruption.

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