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To: Lee who wrote (86610)	12/22/1998 2:24:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 176387

Hi Lee: thanks for the news on interest rate,yeah I think we kinda knew it.I think only 11% of the pundits (eoconomists)surveyed said there would be a cut but the majority did say no cut this time around,how'bout that they got something right finally.<g>

To: Lee who wrote (86610)	12/22/1998 9:24:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 176387

<FOMC & the Interest rates>Manufacturing 1/5th Vs Consumer Spending 2/3rd of the U.S Economy. Lee: This what they say about today's action by the FED. ======================================== Tue, 22 Dec 1998, 9:16pm EST U.S. Federal Reserve Leaves Rates Unchanged, Signaling Confidence for 1999 U.S. Economy: Fed Leaves Overnight Rate Unchanged at 4.75% Washington, Dec. 22 (Bloomberg) -- Federal Reserve policy- makers left U.S. interest rates unchanged, a sign they're confident the economy's eight-year expansion is on track for more growth and low inflation into the new year. The Fed's policy-setting Federal Open Market Committee kept at 4.75 percent its federal funds rate on overnight loans between banks. The decision followed three interest-rate cuts in the past three months when the central bank attention was focused on keeping recessions in Asia and elsewhere from derailing U.S. growth. ''Consumers are spending money with gusto,'' said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis, noting that this has delayed the economic slowdown many forecasters were predicting would be here by now. Spurred by strong consumer spending, U.S. growth may reach 3.7 percent for all of 1998, the third year in a row it surpassed 3 percent. The last time that happened was from 1984 to 1986. Yet the consumer price index is on course for only a 1.6 percent increase this year -- the smallest rise since 1986. Competition and slumping prices for oil and imports suggest inflation will be a non-event in 1999 as well. Given that, the economy shows few signs of needing lower borrowing costs to keep the expansion going. Growth should stay strong in 1999 because manufacturing will pick up on strength in the auto industry and an easing of Asia's economic problems, said Diane Swonk, deputy chief economist at Bank One Corp. in Chicago. Bonds Fall The Dow Jones Industrial Average rose 55.61 points, or 0.62 percent, to close at 9044.46, and the Nasdaq Composite Index fell 17.05 points, or 0.80 percent, to close at 2120.99. The benchmark 30-year Treasury bond extended losses after the Fed announcement, falling 1 11/32 and pushing up its yield almost 9 basis points to 5.15 percent, as investors worried the prospect of higher growth could touch of higher inflation. While manufacturing has shown weakness in recent months, it makes up only one-fifth of the economy. Consumer spending garners attention at the Fed, because it accounts for two-thirds of the economy. Consumers continue spending for a few reasons: unemployment is close to a 28-year low, incomes are rising and the Dow Jones Industrial Average stays near its highs. A rise in stock prices gives consumers confidence, making them feel richer under the so- called wealth effect. ''If stocks keep going strong, the consumer will hang in there,'' said Greg Jones, chief economist at briefing.com in Jackson, Wyoming. Fed Seen on Hold Assuming there are no blows to consumer confidence from a Senate impeachment trial of President Bill Clinton, or some other external shock, the combination of strong growth and low inflation means U.S. central bankers could leave interest rates alone throughout 1999, some economists say. ''The Fed's done easing for a while,'' said Rosanne Cahn, chief equity economist at Credit Suisse First Boston Corp. in New York. Cahn expects the economy to grow 3.6 percent next year, with consumer prices rising just 1.8 percent. The timing of the release of the fourth-quarter growth report -- a few days before the next FOMC meeting on Feb. 2-3 -- means U.S. central bankers probably won't touch interest rates at that meeting, either. ''Given the recent strength in the economy, it is unlikely that the Fed will ease at that time,'' said Stan Shipley, an economist at Merrill Lynch & Co. in New York. Investors in fed funds futures on the Chicago Board of Trade are betting the Fed will leave rates unchanged at the next FOMC meeting. The yield on the federal funds contract for February delivery, a gauge of future Fed interest-rate actions, was unchanged at 4.67 percent today. That's eight basis points below the 4.75 percent overnight bank lending rate, too small a difference to suggest expectations of an interest-rate cut at the next FOMC meeting. Steering the Economy FOMC members cut the overnight bank lending rate by 75 basis points in three moves between Sept. 29 and Nov. 17, citing ''unusual strains'' in the financial markets. In explaining November's move, the Fed said conditions ''can reasonably be expected to be consistent with fostering sustained economic expansion while keeping inflationary pressures subdued.'' ''The Fed's steered us brilliantly this fall,'' said David Jones, chief economist at Aubrey G. Lanston & Co. in New York. ''The Fed eased preemptively and properly to mitigate the effects of the emerging markets' economic crisis. The harsh reality for today's meeting is, we haven't seen any of those effects.''