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To: Les H who wrote (28153)	10/1/1999 3:04:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

Les, thanks for the article... the comment about inflation highlights the self-serving nature of the government's statistics...no matter, the bond market will act as a disciplinarian. regards, hb

To: Les H who wrote (28153)	10/1/1999 4:22:00 PM
From: Les H	Read Replies (2) \| Respond to of 99985

INSIGHT: DOMINANT FED VIEW: NO IMMEDIATE OVERHEATING THREAT By Steven K. Beckner WASHINGTON (MktNews) - While there are certainly misgivings about the pace of demand and the supportiveness of financial conditions in a full employment economy, the dominant view at the Federal Reserve Board is that there is not enough immediate danger of inflation to justify further tightening at this point, Market News International understands. The controlling viewpoint, Market News International is told, is that there is no proximate threat of an inflationary overheating. And while there is more concern about potential inflation pressures among some of the Federal Reserve Bank presidents and a couple of the Fed governors, there is probably not sufficient anxiety to propel a consensus toward a third tightening move at the upcoming Federal Open Market Committee meeting, given the lack of actual inflation. But Market News International also understands that a third hike in the federal funds rate to finish undoing last year's three 25 basis point rate cuts will not be indefinitely postponed. And in fact a move to 5.5% has not been ruled out before year-end, notwithstanding speculation that Y2K considerations rule out rate action until next year. While not totally at ease about the millennium computer bug's impact on the financial system and on household and business behavior, the Fed has been getting increasingly confident about its preparedness to handle almost any eventuality and increasingly optimistic that Y2K effects will be relatively modest. Hence, Fed officials do not feel constrained to act either at the Oct. 5 Federal Open Market Committee meeting or not at all until next February. Officials feel they have considerable flexibility. At the same time, they are uncomfortable with the high degree of uncertainty they feel about a number of facets of the economy. This was illustrated by San Francisco Fed President Robert Parry in his recent speech to the National Association of Business Economists. "There are reasons to doubt the forecasts," Parry said, adding "we're uncertain about the underlying model of the economy." "In that case, preemptive policy can lead to the wrong action," Parry went on. "Given the high degree of uncertainty about forecasts, it could be best for policy to be more cautious." Because output and inflation forecasts have been "off the mark, it makes sense to place less weight on them than we normally have in the past." Of course uncertainty and caution did not prevent the Fed from raising rates twice, but taking the next step is giving policymakers pause.