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To: jhg_in_kc who wrote (151305)	1/13/2000 9:20:00 PM
From: OLDTRADER	Read Replies (1) \| Respond to of 176388

RE:hdl-Thanks-I learned my style at Pembroke Hill ---KC,MO.(class of 50).wbm

To: jhg_in_kc who wrote (151305)	1/13/2000 10:45:00 PM
From: Mick Mørmøny	Respond to of 176388

Greenspan Says Fed Supports Higher Rates Filed at 9:16 p.m. ET WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan said on Thursday the U.S. central bank is intent on defusing mounting imbalances in the booming economy and will support higher borrowing costs to prevent it from overheating. Sending a clear signal that a rise in short-term official U.S. interest rates is imminent, Greenspan told the Economic Club of New York that the Fed did not have the luxury to wait until the forces shaping the fast-changing U.S. economy come into clearer focus. Blaming a ''huge'' rise in equity prices for increasing consumer wealth and driving aggregate demand to a point where supply could not keep pace without fanning higher inflation, Greenspan said rising interest rates were the only way to restore balance in the world's biggest economy. ''In the end, balance is achieved through higher borrowing rates,'' he said, adding that a recent rise in market interest rates was ''supported by a central bank intent on defusing the imbalances that would undermine the expansion''. A copy of his remarks was released in Washington. Greenspan said there was no sign of inflation pressures yet despite labor market conditions that were tighter than at any point in the past generation. But he warned that such signs of rising imbalances could bring the ''economic expansion, its euphoria, and wealth creation to a debilitating halt.'' Fed policymakers meet on Feb. 1-2 amid expectations in world financial markets that they will raise the key federal funds overnight bank lending rate by at least a quarter percentage point to 5.75 percent. That would be its fourth increase in seven months aimed at keeping inflation at bay. MR. INCREMENTAL The yield on the inflation-sensitive 30-year U.S. Treasury bond has risen to 6.65 percent from 6.21 percent a month ago as dealers priced in expectations that the fed funds rate will rise by at least half a percentage point by mid-year. ''Greenspan's comments sent a clear signal of an interest rate hike,'' said Hirokuni Matsumoto, a trader at Yamatane Securities in Tokyo. Some economists have speculated whether Fed policymakers are so concerned about the risk of overheating that they may decide to raise the fed funds by half a percentage point right away. But the Fed has not taken a half-percentage point step in five years, preferring instead to make incremental moves. Greenspan also said that after last year's three rate increases, the process of rising credit costs was ''already well advanced'', suggesting he may be content with a quarter-point step for now. Fed policymakers meet again on March 21, at which point they could administer further tightening moves. The U.S. economy is about to enter an unprecedented ninth year of expansion with growth running at more than five percent. Unemployment at its lowest point in some 30 years as U.S. producers strain to satisfy red-hot consumer demand. ''There has to be a limit to how far the pool of available labor can be drawn down without pressing wage levels beyond productivity'' and causing inflation to rise, Greenspan said. ''Admittedly, we are groping to infer where those limits may be. But that there are limits cannot be open to question.'' THE BOTTOM LINE: THERE'S A LIMIT Greenspan said productivity gains sparked most of all by advances in information technology had raised long-term profit expectations and ''engendered a huge gain in equity prices''. ''Through the so-called 'wealth effect', these gains have tended to foster increases in aggregate demand beyond the increases in supply,'' Greenspan said. That demand could only be filled through rising imports, higher immigration rates or falling unemployment, he added. ''The bottom line, however, is that, while immigration and imports can significantly cushion the consequences of the wealth effect and its draining of the pool of unemployed workers for awhile, there are limits,'' Greenspan said. Greenspan, who earlier this month was reappointed by President Clinton for a fourth term at the helm of the Fed, said recent budget surpluses had helped to absorb ''a good part of the excess of potential private demand over potential supply''. He urged the administration not to abandon fiscal discipline that could ''obviate at least part'' of the need for higher interest rates to keep the economy on an even keel. ___________________________________________________ jhg, Please remind the piano man to take care of his margin account and stay away from the high fliers before the next Fed meeting. He can also keep some sedatives for the difficult days ahead. And don't shoot the messenger. Mick $$$