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To: Frederick Langford who wrote (7203)	6/16/1999 10:29:00 AM
From: Spytrdr	Respond to of 13953

from Briefing.com: 09:48 ET ****** Consumer Price Index : Stocks and bonds are off to a strong start today following the May CPI report. You might recall that it was the April CPI report that ignited the recent inflation scare and prompted all and sundry Fed officials to warn about upside risks to the economy. Briefing.com has argued ever since that report that it was a fluke -- of the past four core CPI readings that were higher than 0.2%, three occurred in the last three Aprils (a fifth was prompted by a tobacco price spike). The message? There is a seasonal adjustment problem with April. And indeed, today's May report supports that view. The core CPI rose just 0.1%, which sent the year/year increase down to 2.0% -- the lowest since 1966! The year-to-date increase of 1.8% indicates that there has been even more improvement in early 1999. With the April report now revealed as a fluke, there is no remaining evidence of an inflation threat. Yes, the Fed might tighten nonetheless, but one quarter point rate hike on June 30 has already been discounted in prices. The threat with today's report was not that the Fed would tighten on June 30; the market already believed that they would. The real threat was that the report would reveal that inflation was truly a problem and that several Fed rate hikes would be needed to slow the economy. That threat was not realized. We are still seeing a disinflationary trend in the economy even though growth remains strong. That's a panacea for stocks. And while one misguided Fed tightening is certainly not good for stocks, we can rest much easier today knowing that it will in fact be misguided -- there is no evidence of rising inflation.