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To: Chuzzlewit who wrote (39018)	4/26/1998 2:29:00 PM
From: Lee	Read Replies (1) \| Respond to of 176388

Hi Chuzz, >>Re:<<when your inflation rate is at 2%>> I can't help it but feel compelled to disagree with your friend. Nat gas prices here, are already sky high and are going higher. tfc-charts.w2d.com Natural Gas - weekly when your inflation rate is at 2% and the average is 4%, a 2% move is a DOUBLING For the 12-month period ended in March, the CPI-U has increased 1.4 percent. stats.bls.gov I believe the average for the last several years is around 3% although wage increases are recently running at 4%. tfc-charts.w2d.com cu weekly - Even with outstanding US demand, there is also a lot of supply coming on line. tfc-charts.w2d.com Yen weekly - Although the Japanese have made some moves to stimulate the economy, they have failed to recognize the core structural problems. Unless these issues are addressed, we cannot get enthusiastic about either Japanese securities or worry about the yen/$ relationship. As for the dollar being upstaged by the Euro, well that seems a long way off. A lot of discussion exists regarding the status of a monetary unit being supported by a central bank which is only economically united and not politically united. Just guess what will happen when Italy wants to reduce rates to stimulate their local economy while Germany wants to raise rates to retard growth. Whose bonds will be sold at what interest and how will the common currency make any difference? tfc-charts.w2d.com Nikkei weekly If you look at the charts, Cu is still declining, Yen is definitely declining and even if OPEC managed to control production, demand is still soft. A very good estimation of where interest rates are going for the near term, (next 6 - 8 months) is described in the following article by the economist Strauss. He discusses key factors which will bias policy decisions in the second half. economeister.com US Price Deceleration to End in '98? But a totally opposite view is discussed in the CBS link. cbs.marketwatch.com. However, I can't imagine that policy could be formulated just based on budget surplus so I don't give the CBS article the same credence. Sorry this is so long winded, but it's sort of my business to be up to date on interest rate since I trade bond options. Best, Lee