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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (32204)	11/4/1999 1:26:00 AM
From: KM	Read Replies (2) \| Respond to of 99985

Thursday November 4, 12:04 am Eastern Time Fed unlikely to raise rates before year end -Post WASHINGTON, Nov 3 (Reuters) - The U.S. Federal Reserve appears unlikely to raise interest rates before year's end, amid signs that the pace of growth in the nation's economy has crested, Washington Post reporter John Berry said on Thursday. Fed policymakers meet next on Nov. 16, and many on Wall Street had been convinced they would nudge interest rates a notch higher. The central bank's Federal Open Market Committee (FOMC) met on Oct. 5 and, even though the policymakers decided then to leave their target for short-term rates steady at 5.25 percent, they adopted a ''bias'' toward raising them at some point in the future. But housing starts and auto sales have dropped and although labor costs are increasing, they aren't accelerating, factors that could work against a near-term increase in rates, Berry wrote. The Fed's own survey of nationwide economic conditions released Wednesday showed that the nation's strong growth may be starting to weaken. Several of the 12 regional Federal Reserve banks found some mild slowing in consumer spending, construction and consumer loan demand. ''There is nothing in the numbers to suggest that inflation is about to jump up and get us,'' Edward G. Boehne, president of the Philadelphia Federal Reserve Bank, told the Post in an interview. ''Jobs are plentiful, but that's more of the same that we have seen over the years...We know there is some risk out there of more inflation, but it has not materialized (and it) may or may not materialize,'' the Post quoted Boehne as saying. Other members of the FOMC, the Fed's policymaking group, are divided over the best course for the central bank to follow, Berry reported, citing interviews with several of them. He gave no direct quotes from other FOMC members. With the economy growing rapidly at a time the nation's unemployment rate is just 4.2 percent, a few FOMC members would prefer to raise rates because they expect that, sooner or later, inflation will get worse if U.S. labor markets remain so tight, Berry reported. But Boehne said, ''Sooner or later we will have an ice age, but we don't have to go out and get huge furnaces right away.'' Federal Reserve Chairman Alan Greenspan last week said he is concerned the economy has been growing at an unsustainable rate, noting that the pool of people seeking jobs has declined from 11.2 million to 9.6 million over the past two years. But he added that the substantial rise in long-term interest rates in recent months has helped dampen economic growth. If rates aren't raised at the coming meeting, there appears to be a consensus among FOMC members that a rate hike is not an option for the following meeting Dec. 21. That would be just too close to the end of the year, with all the concerns about the possible market impact of the millennium computer bug. Fed officials are confident there won't be any major disruptions from the inability of some older computers to recognize the new year as 2000 rather than 1900 but they don't want to add to the public worries by raising rates then. The next opportunity would come at a two-day session Feb. 1-2, though the Fed chairman has the authority to act on his own if the need arises.