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

To: HairBall who wrote (43751)	3/21/2000 2:34:00 PM
From: still learning	Respond to of 99985

Tuesday March 21 2:22 PM ET Fed Raises Key Rate a Quarter-Point WASHINGTON (AP) - The Federal Reserve raised a key interest rate today by a quarter-point - the fifth increase since June - in an effort to slow the speeding economy and keep inflation from escalating. The announcement came after a closed-door meeting of the Federal Reserve's Federal Open Market Committee, the officials who set interest rate policies. The Fed said it was increasing its target for the federal funds rate - the interest that banks charge each other on overnight loans - to 6 percent from 5.75 percent. It also raised its mostly symbolic discount rate, the interest that the Fed charges to make direct loans to banks, by a quarter-point to 5.50 percent from 5.25 percent. In a statement explaining its decision, the Fed said it continues to remain concerned that the rapidly growing economy ``could foster inflationary imbalances that would undermine the economy's record economic expansion.' The Fed's quarter-point increase in the funds rate was expected to be quickly followed by announcements from commercial banks that they were boosting their prime lending rate by a similar quarter point, from the current 8.75 percent to 9 percent. The prime rate is a key benchmark for millions of loans, from home equity and credit card balances to short-term loans for small businesses. The Fed had already raised rates four times in quarter-point steps since June to slow the economy and keep inflation under control. The increases have done little to either slow the economy or its main engine - consumer spending, which accounts for two-thirds of all economic activity. The Fed said future ``risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.' This statement does not guarantee that there will be future rate increases but it puts financial markets on notice that the Fed continues to be worried about inflation dangers.

To: HairBall who wrote (43751)	3/21/2000 2:43:00 PM
From: Doo	Respond to of 99985

Does that mean I have to pursue my manureal interest further, even though the "stoopid speckulator b" has already been ordered? I mean there's only so much doody a guy can spread, even with the best of implements. BTW, RMBS looks like it's begging for another short.

To: HairBall who wrote (43751)	3/21/2000 3:00:00 PM
From: bobby beara	Respond to of 99985

Now the decline can resume...or not...<g> NOT: 207.61.23.98

To: HairBall who wrote (43751)	3/21/2000 3:41:00 PM
From: Crimson Ghost	Read Replies (2) \| Respond to of 99985

Looks like that poster at another site I mentioned yesterday might be right about spoos going as high as 1600 and then crashing.

To: HairBall who wrote (43751)	3/21/2000 5:53:00 PM
From: Les H	Read Replies (1) \| Respond to of 99985

FED RATE HIKE LEAVES ANALYSTS GUESSING HOW MUCH MORE TO COME By Steven K. Beckner Market News International - In raising interest rates again Tuesday, the Federal Reserve gave no indication when or where it might halt the monetary tightening process, leaving analysts to guess how high rates might need to go. Some think another 50 basis points of tightening will suffice, while others look for three times that much over time. Most think the Fed will continue to raise rates incrementally, but some foresaw the possibility of more aggressive action. With blue chip stocks continuing to rally, along with bonds, in expectation of modest tightening, the Fed's policymaking Federal Open Market Committee did as expected and raised the federal funds rate from 5.75% to 6%. The Federal Reserve Board accompanied the move with a 25 basis point rise in the discount rate to 5.5%. The Fed indicated that an indeterminate number of further rate hikes are likely by saying the FOMC "remains concerned that increases in demand will continue to exceed the growth in potential supply, which could foster inflationary imbalances that would undermine the economy's record economic expansion." Analysts also saw significance in the Fed's observation that economic conditions "are essentially the same" as on February 2, when the FOMC last raised the discount and funds rates by 25 basis points. The FOMC opted to retain its tilt toward further tightening, announcing that "the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future." It was the fifth rate hike since last June as the central bank seeks to prevent strong demand for goods and services from overstraining the supply of labor and other resources and fueling wage-price pressures. The latest action immediately set off speculation as to how much more the Fed will be raising rates, and when. The Fed's next FOMC meeting is May 16. David Jones, chief economist for Aubrey G. Lanston & Co., said the Fed's statement "clearly points in the direction of more rate hikes," but said the Fed will continue to raise rates "incrementally," by no more than 25 basis points at a time, "until they see signs domestic demand growth is slowing and coming into balance with potential supply." Real GDP growth will need to slow to no more than 4% to satisfy the Fed, he said. Jones said the Fed also needs to see higher corporate bond yields and at least some "restraint" in the stock market. Jones said he expects just two more 25 basis point rates hikes, which would take the funds rate to 6.5%. He said the next move will likely come at the May meeting, with the second coming either at the June 27-28 or Aug. 22 FOMC meeting. He said the Fed may want to wait until August to weigh the effects of past rate hikes. He added that the Fed "would like to go to the sidelines" well before the November presidential election. Jones said he "would be really surprised" either by an inter-meeting rate hike or by a 50 basis point move. There is a danger that the Fed will "underreact," he said, but "if he (Greenspan) overreacts he could pop the bubble ... . It's a delicate process." Bank One chief economist Dianne Swonk agreed the Fed will continue to take a "gradualist approach," but warned that in so doing it "runs the risk of eventually getting behind the curve.' Swonk observed that financial markets are "waiting for an end" to tightening, but she said the end may not come for quite some time. She said "the Fed sent a very clear message" that it will continue to tighten indefinitely until demand slows. Swonk said she expects only "two additional quarter point moves" this year, but predicted 100 basis points more tightening next year, and possibly more. She also allowed for an additional 25 basis point rate hike this year. Ethan Harris, senior economist for Lehman Brothers, said he has detected an "escalation" of Fed tightening rhetoric and timing, noting that the Fed has moved to raising rates at consecutive FOMC meetings instead of alternate ones. He said the Fed's rate-hike announcement "emphasized the ongoing nature of tightening." Harris said he looks for 25 basis point rate hikes at each of the next three FOMC meeting, but with the stock market "thumbing its nose at the Fed," he said the Fed could be forced to resort to "more aggressive action." Having already increased the frequency of rate hikes, "the next step would be to go 50" basis points, Harris said. "We could get a 50 at the next meeting" or "at one of the next two meetings" if demand doesn't slow and/or stock prices show further strength. He said a move between FOMC meetings is less likely. The Fed has now raised the funds rate 125 basis points since beginning the monetary tightening process last June 30. At 6%, the funds rate is at its highest level since July 1995, but for five years the funds rate has stayed in a remarkably narrow range. Up to this point, the funds rate has done nothing more than return to where it was following the last major monetary tightening cycle much earlier in this record expansion. After completing a doubling of the funds rate to 6% in February 1995, the Fed cut the rate 25 basis points to 5.75% on July 5, 1995, another 25 basis points to 5.5% on Dec. 19, 1995 and a final 25 basis points to 5.25% on Jan. 31, 1996. Its next move was to raise the rate to 5.5% on March 25, 1997. The funds rate stayed at 5.5% until the fall of 1998, when the Fed cut it 75 basis points to 4.75% to counteract the Asian financial contagion. The Fed has now reversed that 75 basis points of emergency easing and tightened an additional 50 basis points.