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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (1898)	6/30/1999 2:47:00 PM
From: Paul Berliner	Read Replies (1) \| Respond to of 3536

The big news is the new neutral bias as opposed to a tightening bias. INSTANT VIEW - Fed hikes fed funds rate to 5.0 pct NEW YORK, June 30 (Reuters) - The following are comments from economists and market experts after the U.S. Federal Reserve announced that it was raising its benchmark short-term interest rate by a quarter percentage point for the first time in 27 months. The Fed, as widely expected by economists, hiked the federal funds rate to 5.0 percent from 4.75 percent. SCOTT GRANNIS, CHIEF ECONOMIST, WESTERN ASSET MANAGEMENT: ''I think this is a relief obviously for the bond market. It reflects that a lot of the economic numbers recently have been somewhat mixed. There is no reason for the Fed to be embarking on a series of tightening moves. The Fed has finally acknowledged that. This rate hike was purely an insurance policy.'' MITCH STAPLEY, CHIEF FIXED INCOME OFFICER, KENT FUNDS: ''They took the bias off. That was the overhang that could have put the bond market into a foul mood. They left the discount rate unchanged too. The negative sentiment would have come in if they would have bumped the discount rate up and maintained the tightening bias. They didn't do that. So they are saying inflation is subdued enough that this could be the tap on the brakes that was needed. They're acknowledging the fact that the market has done a lot of their work for them so far.'' PHIL HILL, ECONOMIST, BRIEFING.COM: ''This was largely expected. There was a lot of talk about leaving the tightening bias, but we're not suprised to see them shift back to a neutral bias. That's what they've done historically. If they had left the tightening bias it would have signaled they were targeting equity prices. I don't think the Fed is interested in popping the equity bubble.'' JIM COONS, CHIEF ECONOMIST, HUNTINGTON NATIONAL BANK: ''Everything is as expected except the neutral bias. That comes as a surprise to me because I had expected they were going to want to move more than 25 basis points. This does not rule out another hike. But it seems they did not want the market to run ahead of it with so much time before the next meeting.'' PAT DIMICK, SENIOR MARKET ECONOMIST, WARBURG DILLON READ LLC: ''The Fed has made it as friendly a 25 basis-point increase by leaving the discount rate unchanged and changing to a neutral bias ... It's a partial take back of last year's easing. The Fed seems to be saying that the prior easing of last year is no longer necessary.'' DAVID JONES, CHIEF ECONOMIST, AUBREY G. LANSTON & CO., INC.: "It's a surprise -- the raise was obviously expected -- going back to the neutral bias was a surprise. It lowers the odds of a further rate hike at the next meeting on August 24. "It has triggered a significant rally in the bond market and the stock market. The danger is that it will boost demand even further and put pressure on the labor market. "There will be another hike before the end of the year, but it might not be until the October 15 meeting. ''The demand indicators (are now the most important U.S. indicators for the Fed to watch) -- retail sales, auto sales and houses -- also average hourly earnings and unemployment.''