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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: AurumRabosa who wrote (67988)	9/21/1999 5:07:00 PM
From: AurumRabosa	Respond to of 132070

Fed To Raise Rates This Year - UCLA Team SAN FRANCISCO (Reuters 9-21-99) - The US Federal Reserve will raise interest rates a half of a percentage point during its last 3 meetings of the year before holding steady in 2000, according to a report released Tuesday. The widely watched quarterly forecast, issued by economists at the Anderson School at UCLA, noted a hike would effectively boost interest rates by one percentage point since the Fed began raising rates back in June, and should be enough to stem the threat of inflation. "Inflation is on the upswing and can spill over to 3% plus territory if left unchecked," the report said. The hikes also could rein in the torrid pace of consumer spending as labor markets remain tight, as well as bring about a so-called soft landing to the current US economic expansion, which is currently in its ninth year. And even though Chairman Alan Greenspan and other Fed officials are wary of the booming stock market, the central bank will hold interest rates at 5.75% during 2000 in order to slowly get red-hot consumption growth under control, the report said. "A few more taps on the brakes and the job will be done," Rajeev Dhawan, who wrote the report, said in a telephone interview. The Fed's policy-making Federal Open Market Committee (FOMC) next meets on October 5 to discuss interest rates. Central bank members have left open the door for future hikes. At its last two meetings in June and August the Fed nudged up its key interest rate to 5.25% from 4.75% -- the first time since the spring of 1994 that the FOMC had raised the short-term U.S. benchmark rate at consecutive meetings. But the Fed will keep raising rates pre-emptively to give itself more room to maneuver in 2000, Dhawan said. "If he does it now, he won't have to worry about it in the year 2000," Dhawan said. "That will slow the economy to a sustainable pace." The UCLA report said after the Fed acts, consumption will slow from a 4.9% pace in 1999 to 2.7% in 2000. The rate rises will also slow gross domestic product (GDP) growth from 3.9% this year to 2.5% in 2000. The core inflation rate, or consumer prices with food and fuel stripped out, was expected to rise only 2.2% in 1999 and 3.0% in 2000. The report pegged the unemployment rate at 4.4% for 1999 and 5.0% in 2000.