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To: PaulM who wrote (20163)	9/30/1998 8:23:00 PM
From: Enigma	Read Replies (1) \| Respond to of 116764

Paul - why do you think rates are headed higher - maybe they should - but don't think they could without absolute mahem at home and abroad. E

To: PaulM who wrote (20163)	9/30/1998 8:36:00 PM
From: goldsnow	Respond to of 116764

Business: The Economy <Picture> IMF warns UK on interest rates <Picture> Bank of England warned to be ready on interest rates <Picture> The International Monetary Fund has warned British authorities to stand ready to cut interest rates in the face of a sharper than expected economic downturn. The call came as the IMF issued a bi-annual report forecasting the ongoing effects of the financial and economic crisis that grips many parts of the world and threatens the West. The report said " there have been increasing signs of growth weakening further" in an already slowing UK economy. May overshoot target The IMF warned the current slowdown might see the UK's inflation target overshot. "The possibility of a sharper slowdown than needed to meet the inflation target, warrants readiness for an early move toward monetary easing," the report said. The report said that although unemployment has fallen to an 18-year low, earnings growth has moderated as Britain tries to meet its inflation target of 2.5%. "Significant fiscal consolidation, together with the tightening of monetary policy should help to contain inflation risks in the period ahead," the IMF said. The IMF's World Economic Outlook report forecast British growth of 2.3% this year, slowing to 1.2% in 1999. Six months ago the fund predicted 2.3% growth in 1998 and 2.2% in 1999. <Picture: [ image: IMF's Michael Mussa: >IMF's Michael Mussa: "good forecasts"IMF chief economist Michael Mussa said he believed the agency's growth forecasts for Britain were a "pretty good central estimate". At odds with Blair The predictions come just as prime minister Tony Blair and chancellor Gordon Brown have firmly turned down demands by industry and Labor party conference delegates for immediate rate cuts. They have said the brief the Government gives the interest rate authority - the Bank of England Monetary Policy Committee - will continue to have inflation and long-term economic goals at the top of its list. This means it won't support rate cuts to alleviate short-term pain. Thousands of jobs have been lost in manufacturing industries across the UK in recent months with the high pound, the Asian crisis and a domestic slowdown blamed. However, Bank of England head Eddie George has signalled rates would be cut if inflation falls below the 2.5% target. Global cuts The warning came as IMF chief economist Michael Mussa threw the organisation's weight behind growing global calls for cuts in interest rates to help restore damaged investor confidence. "The need is to move to easier monetary policy around the world and that is what we are recommending for 90% of the world's economy," he said. The IMF welcomed the U.S. Federal Reserve's decision to cut interest rates on Tuesday and said more easing moves may be needed in the months ahead. news.bbc.co.uk

To: PaulM who wrote (20163)	9/30/1998 8:44:00 PM
From: goldsnow	Respond to of 116764

Expectations for further rate cuts can be seen in Eurodollar futures, among the most sensitive guides to changes in Fed rate expectations. The implied yield on the March contract for three-month Eurodollars stands at 4.74 percent, more than 1/2 point below current three-month borrowing rates. That suggests traders expect the central bank will lower rates by about another 50 basis points before the contract expires in mid-March. ''The weakness in the global economy and a moderation in U.S. growth will cause the Fed to lower rates again,'' said Gemma Wright, a government bond strategist at Fimat USA Inc. bloomberg.com