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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Chip McVickar who wrote (1321)	4/26/2000 8:49:00 AM
From: Chip McVickar	Read Replies (1) \| Respond to of 33421

Durable Goods 2.6% Looks like a wash and a flat market...? Maybe with an upside bias. Fed's McTeer: Economy Growing at Healthy Pace By Marcus Kabel Reuters DALLAS (April 25) - Federal Reserve Bank of Dallas President Robert McTeer said on Tuesday the U.S. economy is growing at a healthy pace and he is not unduly concerned to see scant signs of a slowdown. The Dallas Fed president, long an advocate of the New Economy view that technological change has created huge productivity gains that allow faster U.S. growth without inflationary dangers, said he expects strong growth ahead. ''The economy remains healthy and robust. The 4 percent growth rate (seen over the past four years) probably carried over into the first quarter'' of 2000, McTeer said at an event sponsored by the Greater Dallas Chamber of Commerce. Only if Gross Domestic Product (GDP), a broad measure of the economy's growth rate, registers the torrid 7.3 percent rate seen in fourth quarter of last year would McTeer call it a problem. But a 4 percent rate would be sustainable, he said. The government reports first-quarter GDP on Thursday, and analysts surveyed by Reuters forecast on average 5.9 percent annual growth rate. For all of 1999, the U.S. economy grew at a 4.2 percent rate. Most Fed policymakers have said they consider the speed limit for U.S. economic growth to be about 3.5 percent before shortages create inflationary pressures. With this in mind, the Fed has raised interest rates five times since last June to slow growth and snuff out potential price pressures. McTeer, speaking with reporters after addressing local businessmen, acknowledged that Fed moves to tighten credit have done little so far to take the heat out of the economy. ''It is true the tightening moves so far don't seem to have had a major impact on slowing down the economy,'' McTeer said. ''But we can't ever forget that monetary policy operates with a long and variable lag, as they say,'' he said. ''I don't think we should get too upset. There are some signs of moderation,'' he said, pointing to some construction indicators which suggest higher rates are starting to have some impact. Fed officials have estimated it can take six to nine months before higher interest rates start to slow the economy. Most analysts expect the central bank to keep raising the 6 percent federal funds rate for overnight lending between banks to at least to 6.5 percent by summer. McTeer, who sits on the Fed's policy-setting Federal Open Market Committe (FOMC) but currently does not have a vote, last year argued that rates did not need to be increased despite strong growth because productivity improvements permit faster non-inflationary growth. McTeer repeated comments he made last week that inflation data had been tame, but the March Consumer Price Index numbers were an ugly surprise. CPI rose 0.7 percent and excluding food and energy rose 0.4 percent, pushing the retail inflation rate for the first three months of this year over 3 percent. These prices ''bear close watching,'' McTeer said. He compared the core CPI data to a hog, saying ''if you put lipstick on a hog, it's still a hog.'' Despite that inflation upset, McTeer said productivity gains, which averaged more that 3 percent last year, should continue. He also expects America's 4.1 percent unemployment rate will dip below the 4 percent level in coming months. He added that the labor market ''has been tight as a drum'' recently with the pool of available workers shrinking. Last week, McTeer said the unemployment rate could dip toward 3.8 percent. The Fed's policy-setting Federal Open Market Committee will meet on May 16 to determine a course on interest rates and Wall Street economists expect the panel to raise rates by a quarter of a percentage point to help keep the economy from overheating.