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To: Crimson Ghost who wrote (42215)	3/4/2000 4:00:00 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 99985

George I like this part from the elected politician One congressman recently introduced legislation that would bar military assistance to any oil-exporting country involved in price manipulation. More interesting is the fact that same bu&*ead congressman does not care about currency manipulation - e.g strong dollar policy or for that matter stock manipulation. Haim

To: Crimson Ghost who wrote (42215)	3/4/2000 4:39:00 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 99985

Federal Reserve's Meyer Says Rates Must Rise Further to Contain Inflation By Noam Neusner, Vincent Del Giudice and Michael McKee Fed's Meyer's Call to Raise Rates Comes as Credit Growth Slows bog.frb.fed.us San Francisco, March 4 (Bloomberg) -- Federal Reserve Governor Laurence Meyer's call for higher U.S. interest rates is unlikely to be derailed by economic statistics to be released next week that will show a slowing pace in consumer borrowing. Meyer, who spoke last night, said rates should rise until the economy slows to a pace that will keep inflation in check. At that point, policy-makers will need to be prepared to raise rates again if signs of accelerating inflation appear, though they can probably afford to take a ``reactive' rather than pre-emptive approach, Meyer said. His comments were in the text of remarks to a joint conference of the San Francisco Federal Reserve Bank and the Stanford Institute for Economic Policy Research. Next week, the Federal Reserve will release data that's likely to show the slowest increase in three months of consumer borrowing, analysts said. Consumers have supplied the momentum behind the U.S. economic expansion, now in its record 108th month. Still, higher interest rates on credit card bills could temper the borrowing and spending that has been encouraged by stock market gains and low unemployment. The Fed has raised the overnight bank lending rate by a full percentage point since June to 5.75 percent in a ``forward-looking attempt to prevent further tightening of the labor market,' said Meyer. As such, he said, the Fed's four interest rate increases in the last year have constituted an ``aggressive' strategy and not merely a response to declines in the unemployment rate. Meyer's speech was closed to reporters, though the Fed made the text available. In the speech, he outlined a two-pronged approach to setting interest-rate policy at a time when the economy isn't acting as economists once presumed it would. Forecasting Difficulties Falling unemployment and faster economic growth once were expected to trigger a pickup in inflation, though that hasn't happened, he said. February's unemployment rate of 4.1 percent is close to at a 30-year low. The economy has expanded at a better than 4 percent annual rate the past three years. Still, core consumer price inflation in January -- outside of food and energy costs -- was at a year-over-year rate lower than at any time since 1965. Meyer and other Fed policy-makers have said a surge in worker productivity has made the old equations out-of-date and made forecasting economic developments more difficult for central bankers. ``Structural changes of uncertain magnitude and timing have increased the difficulty in forecasting, undermined confidence in our understanding of the structure of the economy, and increased the risk of measurement error with respect to key variables,' Meyer said. That's led Meyer to suggest two approaches to deciding when and by how much to raise interest rates in the current environment. ``I think that one of the subtleties of policy is sometimes being content to respond incrementally to the incoming data and sometimes becoming more aggressive and responding to forecasts,' Meyer said. `Aggressively Reactive' The challenge for policy-makers is identifying the new levels of growth and unemployment that the economy can reach without touching off inflation, he said. Then, policy-makers must distinguish whether they need to merely ``limit inflation risks,' or take more aggressive action to keep economic demand from getting far ahead of supply. If the core inflation rate starts to rise, the Fed should strike swiftly. ``My instinct tells me that, as policy becomes less pre-emptive, it should become more aggressively reactive,' he said. In 1999, he said, ``As the unemployment rate fell farther below the best estimates' for a non-inflationary environment ``and the risk of overheating increased, policymakers became less tolerant of continued above-trend growth.' Now, he said, is the time to respond to forecasts that the unemployment is going to decline further unless economic growth slows. Waiting for inflation to accelerate isn't an acceptable option, he said. More aggressive Fed action may be soon upon us, he suggested. ``In my judgement, the unemployment rate has already declined to a sufficiently low level relative to' what is possible without encouraging a pickup in inflation, he said. ``We should no longer be attenuating the marginal policy response to further declines. ``The current policy is, in my view, also an aggressive version of such a strategy,' he said. Once the economy slows to a point where demand no longer outstrips supply, Fed policy-makers could become less stringent, allowing interest rates to stay where they are ``without evidence from realized inflation that the prevailing gap is unsustainable,' he said. However, the Fed would have to raise rates ``above and beyond what is presumed to be necessary to slow the economy' if less aggressive efforts fail to pan out, he said.