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To: Jim Willie CB who wrote (8100)	10/15/2000 10:24:49 AM
From: T L Comiskey	Respond to of 65232

Fed Speaks Out Amid Economic Queasiness WASHINGTON (Reuters) - Top U.S. Federal Reserve policymakers launch a speaking blitz this week that will be closely scrutinized for any hints the current bout of economic queasiness could prompt future policy shift. Persistently high oil prices, already identified as a threat by the inflation-wary Fed, are seen by some analysts as a special red flag for Federal Reserve Chairman Alan Greenspan and other central bankers who worry about keeping intact the current ``virtuous cycle'' of steady growth and low inflation. Continuing violence in the Middle East kept oil prices near $35 a barrel on Friday, far above levels that industrial countries have indicated they were comfortable with, though stock markets rebounded smartly from a tumble a day earlier. ``Oil prices put the Fed in a little bit of a bind,'' said economist Paul Kasriel of Northern Trust Co. in Chicago. ``Does it ignore the inflation potential and risk monetizing or validating the increases we are seeing or does it try to slow the economy through more tightening and risk slowing it more than it wants to do?'' Regional Fed Presidents Thomas Hoenig and Robert McTeer both mentioned oil prices in separate speeches last week as a possible dark cloud on the horizon. So any references to energy by Greenspan and the other Fed governors will likely attract attention. The Fed chairman speaks first on Monday to a financial markets conference in Georgia, and again on Thursday in Washington before a monetary conference sponsored by the Cato Institute. His Thursday remarks will get special attention. Economist John Ryding of Bear, Stearns and Co. Inc. in New York noted that, at the conclusion of the Oct. 3 policymaking meeting of the Federal Open Market Committee, the central bank made particular mention of rising energy prices. OIL IMPACT LIMITED SO FAR The Fed said that energy prices were so far having only a ''limited effect'' on prices, but said risks remained weighted toward rising inflation. ``If Greenspan said that he now felt there was increased downside risk for the economy, or noted that there might be a shift toward a neutral policy because of that, that would be very significant,'' Ryding said. Bear, Stearns research indicates that even if oil prices remained at $35 a barrel, rather than fell to a lower level of around $20, it would still only shave between one-half percentage point and three-quarters of a percentage point from U.S. economic growth. There are other heavyweights on the speaking roster this week besides Greenspan. On Thursday, Fed Gov. Laurence Meyer is scheduled to deliver his quarterly economic speech on the economic outlook to a Washington University audience in St. Louis, Missouri. Meyer is known as an inflation hawk, but analysts say there are still reasons why the central bank might want to drop its stance that risks are weighted toward inflation. ``I think we are to the point where the economy is definitely slowing,'' said Mark Zandi of Economy.com in West Chester, Pennsylvania, noting that consumer spending has eased from ``boom-type levels'' at the beginning of the year while housing has slowed under the impact of higher interest rates. ``They (Fed officials) could use this as an opportunity to begin laying the intellectual framework for a change in bias, to a more neutral stance -- maybe not at the next meeting but in future,'' Zandi said. Fed Vice-Chairman Roger Ferguson also speaks this week, at a banking awards conference in Washington on Thursday and on Friday at a financial services conference in St. Louis. Now in a record 10th year of unbroken growth, the U.S. economy has benefited from steady increases in productivity that have helped generate budget surpluses that permit lower interest rates, foster investment and keep productivity growing: the so-called virtuous cycle. FEAR OF SUPPLY SHOCK But lofty oil could prove a stumbling block. ``Energy is a highly complicating factor because it has the potential to apply a supply shock that limits how fast the economy can grow,'' Kasriel said, especially at a time when demand is still growing so rapidly that it risks firing inflation despite the fact that the overall economy is losing some strength. Three past energy price shocks -- in 1973, 1979 and 1990 -- led to recessions. The rise in energy costs pushed up wholesale prices by an unexpectedly large 0.9 percent in September while retail sales also rose a hefty 0.9 percent, in part because of higher gasoline costs, the government said on Friday. Economist Allen Sinai of Primark Decision Economics Inc. in Boston said he expects Fed policymakers to ``stick to the script'' that the economy is coming into balance as growth slows but that inflation risks continue. ``What everyone is going to be looking for is some sign of sensitivity from the Fed that there is a downside risk to the economy from high energy prices,'' Sinai said, adding that financial markets likely would be heartened. ``At any time over the past 10 years when there was economic unease, the markets could count on the Fed helping out, but that's a problem when its gas and oil that's causing the problem,'' because of its potential for spreading through the economy and generating inflation, Sinai said. ``Some sign of sensitivity by the Fed about the economic risks, even one without committing the Fed to any specified policy, would be taken very positively,'' he added.

To: Jim Willie CB who wrote (8100)	10/15/2000 12:18:57 PM
From: Mannie	Read Replies (1) \| Respond to of 65232

The latest PPI numbers that were released on Friday will make it tough for the Fed to lower rates, although I agree they should. The post that abstract put up about massive inflows into the ever dropping market are very eye opening. Record inflows are not able to sustain the market. And yep, the Mariners do lack pitching, actually they lack the $$$ required to buy anything and everything you need to win a ring. I'll be out at the park today, I think they will beat Neagle again. Scott