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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Chip McVickar who wrote (441)	8/20/1998 5:28:00 PM
From: X Y Zebra	Respond to of 3536

cbs.marketwatch.com Fed voted 10-1 in July to hold rates Yet members still see risk of rising inflation By Jeffry Bartash, CBS MarketWatch Last Update: 2:46 PM ET Aug 20, 1998 WASHINGTON (CBS.MW) -- The Federal Reserve's policy-making arm voted 10-1 in July to leave interest rates unchanged with a bias to tighten credit, while taking a "wait and see" policy, according to newly released minutes of the meeting. At its June 30-July 1 meeting, the Federal Open Market Committee said that while it appeared the U.S. economy was starting to slow from the first quarter's fast pace, "most of the members felt that the risks continued to point on balance toward rising inflation," the minutes said. "With regard to the outlook for prices and wages, members observed that some key measures of price inflation had displayed a modest uptilt recently," the minutes said. Indeed, the minutes made it surprisingly clear that many policymakers are close to pulling the interest-rate trigger. "A number of these members ... believed that the committee should take advantage of any early opportunity to tighten policy to improve the prospects of containing inflation and prolonging the economic expansion," the Fed said. The fed funds rate, which the central bank uses to push other U.S. interest rates up and down, remains at 5.50 percent. The Fed last changed rates in March 1997. The lone dissenter was Cleveland Federal Reserve Bank President Jerry Jordan, one of two members to vote against the majority in the panel's last meeting, in May. Jordan called for a rate hike "because he believed that the unsustainably rapid growth of domestic demand -- fueled by the acceleration of money and credit growth in the past year -- was reflected in the recent sharp increase in imports and rising trade deficits." Although the FOMC members emphasized the state of the U.S. economy took precedence in its decision-making, overseas played a role as well. "Another important reason for deferring any policy action was that a tightening move would involve the risk of outsized reactions and consequent destabilizing effects on financial markets in the growing number of countries abroad that were experiencing financial difficulties," the minutes said.