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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Hawkmoon who wrote (2417)	2/3/2000 2:38:00 PM
From: Sam	Read Replies (2) of 3536

Ron, Paul, all, Thanks for your comments on the startling drop in the bond yield today. Take a look at this brief Reuters article on the Dec Fed meeting. See especially the last paragraph: U.S. Fed unanimous for steady rates in December WASHINGTON, Feb 3 (Reuters) - The U.S. Federal Reserve voted unanimously in December to keep interest rates steady for fear of rattling financial markets ahead of the Year 2000 date change, though they worried the economy was growing too fast, minutes of the meeting released on Thursday said. The Federal Open Market Committee voted 10-0 on Dec. 21 for steady rates, deciding they could wait until their Feb. 1-2 meeting to deal with inflation risks. The Fed announced on Wednesday that it was boosting two key interest rates a quarter percentage point to brake the economy. ``The committee's primary near-term objective was to foster steady conditions in financial markets during the period of the century date change,' said the minutes, which are usually released shortly after the next FOMC meeting. The Fed said it saw evidence of persistent strength in the economy with relatively subdued price and wage inflation. ``The economy clearly would carry substantial expansionary momentum into the new year, quite possibly in excess of growth in the economy's long-run potential, and the key issue for the committee was whether growth in aggregate demand would slow to a more sustainable pace without further tightening,' the minutes said. The only indication of any slowing was a modest softening in housing markets. They said business activity was so strong that it was ``severely taxing' labor markets and might be constraining growth in some industries and regions of the country. [my bold; end article] My question is if the labor markets are indeed so tight that they "might be constrainging growth in some industries and regions", why can't the Fed just allow the tight labor markets to take care of the slowing?

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