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To: Bobby Yellin who wrote (14050)	7/2/1998 4:12:00 PM
From: Alex	Respond to of 116950

Rare early FOMC dissent underscores inflation fear By Isabelle Clary NEW YORK, July 2 (Reuters) - Federal Reserve Bank of St. Louis President William Poole's dissenting vote in May -- a rare move early in a policymaker's tenure -- underscored the Fed's inflation worries, analysts said on Thursday. ''No policymaker has cast a dissenting vote in his or her first year at the FOMC (Federal Open Market Committee) over the past two decades. And that's only how far my records go,'' said David Resler, managing director at Nomura Securities International. Resler was commenting on the May 19 FOMC minutes released on Thursday that showed Poole and Cleveland Fed President Jerry Jordan dissenting for a rate hike. The 10 other FOMC voting members decided to keep policy steady with a tightening bias. Poole took the helm of the St. Louis Fed in March. The May FOMC meeting was only the second he attended. Poole, who heads a bank with a monetarist tradition, cited ''sustained increase in money growth,'' while Jordan, a former St. Louis Fed economist, expressed concern over ''real estate and other asset prices.'' ''The minutes said the decision not to raise rates was a 'close call','' Resler added. ''Poole's dissent may well reflect the views of other FOMC members who did not get to vote. It's very unusual for a newcomer to stick out his head.'' The seven Fed Board governors and the 12 Fed bank presidents take part in the monetary policy debate. While all the governors and the New York Fed president always vote, 11 presidents vote on a rotating basis. The minutes showed ''all the members'' seeing the risks to the U.S. expansion ''tilted in the direction of rising inflation'' which may warrant a rate hike as ''a likely though not an inevitable prospect.'' Minutes of FOMC meetings are released with a six- to eight-week lag. The FOMC has met again this week and left the federal funds rate unchanged at 5.50 percent. The minutes of that meeting will be made public on August 20. Resler noted that Jordan's dissent came as less of a surprise since the Cleveland Fed president had already voted for higher rates in March. ''It's surprising,'' said Daiwa Securities America chief economist Michael Moran of Poole's dissent. Moran noted the Treasury market may be underestimating the concern over inflationary pressure at the Fed. The need for a marked slowdown in domestic demand was mentioned in both the May meeting minutes and Fed Chairman Alan Greenspan's recent address before the Joint Economic Committee (JEC) of Congress. ''Monetary policy might need to tighten if demand were to continue to exhibit few signs of abating noticeably,'' Greenspan told the JEC. Moran expected Greenspan's Humphrey-Hawkins congressional testimony in late July to have ''the same tone as at the JEC when Greenspan expressed concern about inflation and the need for tighter monetary policy but also the fallout from Asia and the effect of stronger productivity growth and international competition.'' But some market participants are expecting Greenspan to hint at the possibility of an easing down the road as the U.S. inventory drawdown, the General Motors (GM - news) strike and Japan's economic contraction may bring the roaring American expansion to a much subdued pace.