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To: Johnny Canuck who wrote (21537)	6/14/1999 2:10:00 PM
From: Johnny Canuck	Respond to of 67928

ATLANTA, June 14 (Reuters) - Federal Reserve Bank of Atlanta President Jack Guynn on Monday spelled out five reasons why the Federal Open Market Committee (FOMC) may raise the benchmark federal funds rate when it meets on June 29 and 30. In a sweeping overview of the U.S. economic outlook, Guynn listed a recovering global economy, a lenient U.S. monetary policy, rising market rates, rapid money growth and tight labor markets as red lights pointing to rising inflation risks. ''In my judgment, the risks are currently weighed toward the possibility -- though not the inevitability -- of growing inflationary pressures,'' Guynn told a Carreker-Antinori conference on new banking technology. ''We are prepared to adjust policy if and when that seems appropriate.'' Guynn is not an FOMC voting member this year, but policymakers' key speeches on monetary policy usually receive the Fed Board's stamp of approval before being made public. The Fed has already said it is leaning toward raising the funds rate because American consumers and businesses are not cooling off their spending -- a pattern that historically pushes prices and salaries higher. The depressed global economy, roiled by a rolling crisis over the past two years, has left producers and manufacturers with little pricing power worldwide, benefiting the U.S. inflation situation -- for a while. ''The economies of Asia and elsewhere have turned the corner to recovery, global demand has picked up, and so have prices,'' Guynn said, remarking on the rebound in oil and other commodity prices. ''If you add it all up... some of that excess capacity that has been in some of those economies would be one of things we would not have in our favor (on the inflation side).'' The Fed played an important role in the global recovery when it lowered the funds rate by three-quarters of a point last fall, helping stabilize roiled financial markets and faltering economies around the globe. But lower interest rates also gave the U.S. economy a strong stimulus at a time when it was already racing ahead. Guynn said business people in his Fed bank district that covers the Southeast urged him to ''be prepared to do what you need to do to keep inflation under control.'' Guynn also noted the backup in market rates has not slowed down the economy much and is no substitute for a Fed hike. ''We still have our job to do. The risks are there. It's our job to act,'' he said while pointing out the recent selloff in Treasury securities may reflect rising inflation expectations. The Atlanta Fed President also warned that rapid money growth is a concern at the Fed because inflation, in the end, is about too many dollars chasing too few goods. Finally, Guynn worried that ''tight labor market conditions are a signal that the economy is overstimulated,'' mainly because there is no guarantee the high productivity seen in recent years can be maintained -- a factor that is crucial for low inflation.