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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (1187)	5/24/2001 3:40:02 PM
From: MrGreenJeans	Read Replies (3) \| Respond to of 10065

Wally Still doing squat here at work: FED TALK: Comments by Federal Reserve Governor Laurence Meyer have pushed the bond market sharply lower. Short-term maturities have been especially hurt by Meyer's expression of hawkishness. While it is not unusual for Meyer to deliver hawkish remarks (see Bondtalk.com's hawk/dove scale), that he did so this afternoon, just hours before Federal Reserve Chairman Alan Greenspan is set to deliver a key speech in New York, puts added weight upon his comments. Moreover, Meyer used language that can easily be construed as intent to send a message to the markets. Here is the most telling part of his speech: "We have been quick and aggressive in responding to what we viewed as a threat of a slowdown that was steeper than necessary to contain inflation, and the risks remain tilted in that direction. But we have to remember both halves of the dual mandate. Given that labor markets remain tight, that inflation remains above the rate that I would find acceptable over the longer run, and that core inflation has been edging higher, attention must also be given to calibrating the easing to avoid overshooting in the other direction in a way that ends up adding to price pressures as growth strengthens." You need only see one word to get the message: "overshooting." There is no doubt that Meyer knew the interpretation that the markets would assign to that word so his mere mention of it can be taken either as a sign that he believes that the Fed is nearly done, or as a major gaffe, or perhaps Meyer chose the word knowing it might affect the bond market but didn't care. That he might turn his back on the bond market is not be surprising when you consider that he recently remarked that the Fed acts independently of the markets. Meyer expounded this view in-depth in remarks that were later aired on television. Greenspan is not likely to echo the hawkish remarks that Meyer delivered, given the fragility of the markets and the fact that an economic rebound is by no means secured. Expect Greenspan to be cautiously optimistic on the economic outlook and look especially to his comments on productivity.