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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (6407)	4/27/2001 8:05:34 AM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 52237

From: Les Horowitz Thursday, Apr 26, 2001 11:55 PM Respond to of 58 <<< Federal reserve articles >>> Is the Fed done? ht tp://www.asiawise.com/mainpage.asp?mainaction=50&articleid=1529 Rate cuts give inflation jitters By Peronet Despeignes in Washington Published: April 26 2001 19:38GMT \| Last Updated: April 27 2001 02:36GMT The Federal Reserve's recent interest-rate cuts have left inflation jitters in their wake. A growing number of economists fear that worries over rising prices and wages could hamper the Fed's efforts to revive US economic growth and eventually lead to higher interest rates. As US equity prices have plunged, the central bank has abruptly turned its attention from inflation to recession and embarked on its boldest bid to jump start the economy since Alan Greenspan became chairman in 1987. But inflation concerns persist. The Conference Board's survey this week reported the highest inflation expectations since 1993. The difference between yields on 10-year Treasury bonds and inflation-protected Treasury bonds has widened this year to a five-month high. And mortgage rates, after earlier slides, are on the rise. "We don't believe inflation is going to go up, but the market expects it to," said David Ging, bond analyst at CSFB. Expectations matter because doubts about a currency's future purchasing power and subsequent drops in demand for it contribute to inflation. But other measures of expectations - including the dollar price of gold, a traditional inflation hedge which surged earlier this year but is now near decade lows, and the dollar, close to 14-year highs - suggest inflation is under control or offset by other factors. However, inflation has accelerated over the past year to a five-year high, measured by the consumer price index and GDP price deflator. While labour costs have trended down on a year-over-year basis, the Labour Department reported on Thursday that through the first quarter they grew at the fastest pace in a year. Inflation hawks fear rate cuts have exacerbated this and risk eroding the central bank's long-term credibility, making future inflation-fighting efforts harder. Fed officials insist it is under control, but with less clarity and frequency than last year. Statements made by the Fed's policy-making open market committee after interest-rate setting meetings have, since January, failed to describe inflation as "contained", only reiterating the central bank's bias: that the risk of recession outweighs that of inflation. Robert McTeer, the Dallas Fed president, acknowledged inflation was "not dead," but said the Fed was preoccupied: "Right now, we're worried about being on the edge of something that starts with R. We've got to put our concerns about inflation on the back burner." Meanwhile, some economists are entertaining the possibility of 4 per cent inflation this year. Others see its ascent as temporary. Mr Ging says market inflation expectations are "still pretty minimal". The fact several inflation-expectations measures remain close to historic lows amid what some consider the Fed's biggest easing since 1984 may be a testament to the central bank's credibility. news.ft.com V0MC&live=true&tagid=ZZZOMSJK30C&subheading=US ======================================================== I didn't see this disussed much yesterday but on the inflation arguement, yesterday's employment cost index wasn't very inflation friendly. From the release I received via E-mail from the Fed.... EMPLOYMENT COST INDEX-MARCH 2001 The Employment Cost Index (not seasonally adjusted) for March 2001 was 152.5 (June 1989=100), an increase of 4.1 percent from March 2000, the U.S. Department of Labor's Bureau of Labor Statistics reported today. The Employment Cost Index (ECI) measures changes in compensation costs, which include wages, salaries, and employer costs for employee benefits. Quarterly numbers weren't bad at around 1% but that didn't have all the rate cuts in it like the monthly one did. Just something else to watch. Good Luck, Lee