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

To: Louis V. Lambrecht who wrote (4202)	6/28/2001 10:20:26 PM
From: John Pitera	Respond to of 33421

Louis, It's very true that a Central Bank or even a few of them acting in concert can not alter in a material way a trend that is rooted in underlying fundamental economic forces. the Fed's May meeting minutes were released today ------------ The May FOMC minutes shows some dissension in the ranks. Kansas City Fed president Hoenig dissented against the 50 bp ease in favor of 25 bp. Two others noted that they could accept the smaller 25 bp rate cut. Equally important, the policy-setting committee foresaw the need to move to a neutral stance "well before" the economy rebounded. Some on the committee saw the rise in core inflation increasingly worrisome though most didn't expect a significant rise. The key uncertainty was the timing of the inventory correction as business spending was expected to remain weak. The insight from the minutes carry large implications now that the FOMC has eased another 25 bp....... ........Hoenig's dissent against the 50 bp May ease was detailed in the minutes. Hoenig preferred a 25 bp ease given that weaker economic growth still tended to dominate those of rising inflation and called for some further easing, but the Committee had added significant liquidity to the economy this year through its cumulatively large easing actions. The lagged effects of those actions should be felt increasingly over time. Moreover, following the rapid and aggressive policy actions already taken, a more cautious policy move at this point would in his view appropriately limit the risks of producing an overly accommodative policy stance and rising inflation over time. Sounds like the argument envisioned for 25 bp yesterday.