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To: Zardoz who wrote (35703)	6/22/1999 7:24:00 PM
From: goldsnow	Respond to of 116768

NY Fed's McDonough sees danger of U.S. inflation NEW YORK, June 22 (Reuters) - Federal Reserve Bank of New York President William McDonough said on Tuesday the U.S. central bank will do what it takes to ensure inflationary pressures do not endanger the booming U.S. expansion. ''At this point, the issue is the potential for inflation, which, if allowed to break out, is destructive to the economy,'' McDonough told the Money Marketeers of New York University, a group of Wall Street economists who gave him their annual Distinguished Achievement Award. ''I think you can count on the Federal Reserve to pursue a monetary policy that permits sustainable economic growth... through price stability.'' Wall Street analysts widely expect the Federal Open Market Committee (FOMC) to raise the federal funds rate by one quarter point to 5.0 percent when it meets on June 29-30. The Consumer Price Index (CPI) has been the focus of the inflation-wary Treasury market in recent months. The CPI surged 0.7 percent in April, largely due to a surge in energy prices, but was flat in May. ''One has to be wary about monthly CPI figures,'' McDonough pointed out. ''Recent monthly data have been unusually volatile and they simply defy analysis. It is time to be vigilant.'' He said inflation often stems from excessive lending, a phenomenon that historically accompanies late stages of an expansion. ''Banks are now at a crucial phase of the credit cycle,'' warned McDonough who stressed ''the importance of maintaining rigorous credit standards.'' McDonough also observed that the global economy was recovering, and said further improvements in Europe and Japan would be key for emerging market economies. biz.yahoo.com