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To: Bill Harmond who wrote (24244)	11/2/1998 11:01:00 PM
From: Gary Walker	Respond to of 164684

Future Fed actions are the key. We all know that a rising tide raises all boats especially the trendy stocks with a story.......but the reverse is certainly true. The Fed had the choice in October to either cut US rates and raise the risk of inflation later or not act and risk an October equity market meltdown and global depression. In reality, there was only one choice for AG. He sees the data, the wage/salary push and the labor shortages. He's concerned and may be reluctant to cut further now that global markets have improved. However, deflation is also at work on global commodity prices, and have mitigated the wage/salary concerns. Now the choice is wait and see if the markets continue to improve without further rate cuts or go ahead and cut and risk inflation later on. AG has been obsessed with controlling inflation these many years, and he can always cut rates later. The market rebound may be greater than the Fed expected. Some irrational behavior (ie. speculation) is already creeping back into the markets. It would be highly unusual to not lower rates at the next BOG meeting after doing an emergency cut in between. We must consider that the cut was "only" 1/4 point and the bond market has dropped. AG might just say, "mission accomplished" and hold the course for a month. How do you think the markets would greet non-action by the Fed in November? My feel that the "big mo" would hardly notice....