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To: PaulM who wrote (10355)	4/21/1998 11:11:00 PM
From: Broken_Clock	Respond to of 116815

from Yahoo... Tuesday April 21, 10:08 pm Eastern Time FOCUS-Fed to act unless Asia cuts growth-Ferguson By Knut Engelmann WASHINGTON, April 21 (Reuters) - Buoyant growth in the U.S. economy risks fueling inflation and the Fed will have to raise interest rates unless the effects of Asia's crisis slow it down soon, Federal Reserve Governor Roger Ferguson said on Tuesday. In an interview with Reuters, the central banker said tight U.S. labor markets and strong domestic demand had tilted the balance of risks to the economy toward a pickup in inflation. ''Either Asia will slow the economy to something that is more sustainable or there will have to be some Fed action that will do that,'' Ferguson said. His comments were among the clearest indication in recent weeks that a growing number of Fed board members is increasingly worried about the strong pace of growth in the U.S. economy. Inflation-sensitive U.S. bond prices moved higher after his remarks and the dollar strengthened against key currencies. ''There is a group of people in the Fed that's worried, and if the economy doesn't slow down it's going to be a problem to them,'' said economist James Glassman of Chase Securities in New York. Ferguson said economic data due to be released over the next few weeks should help to draw a more concise picture of the conditions in the world's top economy, but insisted that so far, the impact of Asia's financial turmoil had been moderate. ''I'd expect a clearer picture in the second quarter,'' he said, but added that current growth rates were ''probably unsustainable by any reasonable measure.'' ''The risk we face now is that Asia will slow us down less than we thought. The risks have moved from being balanced to perhaps being tilted toward the upside,'' he noted. Ferguson added that even though the economy appeared to be approaching price stability, it was important not to risk that achievement. ''We are clearly above anybody's expectation of what a reasonable growth trend is. We may be in a position where we have above-trend growth which is unsustainable,'' he said. ''You don't have overheating showing up just yet because there are special factors holding down inflation.'' Ferguson added it was important to keep in mind that the Fed needed to act in a forward-looking manner since the effects of changes in interest rates could take as long as a year to affect activity in the real economy. The Fed has kept interest rates steady for more than a year and the key overnight federal funds rate stands at 5.5 percent. Its interest rate-setting council is scheduled to hold its next meeting on May 19.

To: PaulM who wrote (10355)	4/21/1998 11:12:00 PM
From: Gabriela Neri	Respond to of 116815

The party is winding down. This guy cant just get it. He tries, but fails ultimately to believe that the dollar can get whacked in a serious way, irregardless of a rise in interest rates. He has been right for a long time as a dollar bull, but he will not get off the train. Nonetheless, worthwhile commentary to ponder. Currencies: You Say Strong, I Say Weak Ravi Bulchandani (London) + Sentiment towards the Euro has shifted subtly in the last few weeks, and market participants have used the "strong Euro" theory as a reason to buy DM against everything. The dollar, sterling and the Swiss franc have all suffered. + I think that blanket slogans like "strong" or "weak" are a waste of time and have little impact on day to day trading in the currency markets. You would not necessarily buy the DM today if you thought that the Euro was going to be a strong currency over the medium term. + I think that the main reason for the DM's recent strength is a change in interest rate expectations in Europe, while interest rate expectations in the US are flat. If the US bond market has it right and the US economy is going to slow, then the dollar will not rise. But US growth looks very well supported to me, and I am sticking to the view that the dollar will go higher. Strong Euro sentiment is everywhere -- Barton Biggs is the latest convert to the strong Euro view, opining that for US investors in European stocks this is like "having the wind at their backs". And our resident bond bear Steve Roach writes that if there is a crack in the stock markets (caused perhaps by expectations that the Fed might tighten), then there will be a flight into cash and bonds, perhaps limiting the upside for US interest rates. Whatever the reason, there is no denying that the last few weeks have seen Euro fever come back into the markets. I am very suspicious of this -- most of the arguments suggesting that the Euro should be a strong currency just because it exists seem rather weak to me. But the supply and demand for the Euro, and its strength or weakness, are topics for another day. To me the recent strength in the DM has more to do with changes in interest rate expectations. What has happened? In Europe interest rate expectations for year end have moved up by about 20 bp over the last couple of weeks. And in the US the weak March payroll data have encouraged the bond bulls, with the result that there is no Fed action at all priced into the structure of US interest rates for the foreseeable future. As long as this state of affairs continues, the dollar is unlikely to go much higher. But I think that it is important to be clear that the main reason for the pressure on the dollar is the structure of interest rate expectations, not anything to do with whether the Euro will be strong or weak. Going forward, there are a few outstanding matters out there which are unlikely to help European policy credibility. In the first place there is plenty of room for raucous disagreement about the appropriate level of interest rates for Europe. While central bankers can probably be relied upon to be discreet, I fear that it might be a long hot summer as French politicians make their feelings known if interest rates do rise in Q3 as we expect. Also, the current wrangling about the head of the ECB which is being ignored by market participants raises quite troubling issues about the politicization of European monetary policy. These are factors that will prospectively weaken the DM/Euro in the near term, irrespective of whether it is going to be a strong or a weak currency over the medium term. The global structure of interest rate expectations clearly limits the dollar upside in the near term. But if interest rate expectations do shift in the direction of expecting higher interest rates in the US and lower rates in Europe than are currently priced in, then no amount of strong Euro talk in the markets will keep the DM up, and the dollar will head towards our unchanged 2.00 target. One caveat: if there is a major crack in US stock markets, then it is unlikely that the dollar can rise faced with that. But it should not fall very much given that it is hard to imagine a significant US correction that leaves global markets untouched. Currencies are relative prices after all.

To: PaulM who wrote (10355)	4/22/1998 1:09:00 AM
From: Ahda	Read Replies (1) \| Respond to of 116815

Thanks Paul I read a very interesting article in meeting requirements for the Emu Europe had to become efficient Cost control par say.Taxation structures would have to be changed etc. France i am sure will be a problem the Western half of Canada would certainly agree to that statement. Templeton less than 50 percent USA now. Hard to raise rates with the Y2k ahead of us. Tho from my perspective there is inflation for sure property where i live is starting to move .