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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Casaubon who wrote (14185)	5/17/1999 10:23:00 AM
From: Moominoid	Respond to of 99985

Thanks for your comments. I reckon no change too as it's just one months figures so far that are really causing alarm and I too thought they might give Summers a break for a while.... of course the Fed is independent ... but. David

To: Casaubon who wrote (14185)	5/17/1999 10:47:00 AM
From: j.o.	Respond to of 99985

One thing that one should bear in mind with Greenspan is that he looks at all of the figures in incredible detail. It doesn't go unnoticed by him when an anomaly inflates or depresses one CPI number. He is also very wary of shaking the market, though he feels that it's too high. I think that he will do what's necessary on the rates front...and I agree that this Fed meeting will be too early for a move. But he will let the market know that he's vigilant for confirmation that inflation might pick up, and that the market might want to take this into consideration. He will try to massage the market down slowly, since he of all people knows how badly the US economy might get hurt if the market were to take a 20% hit and stay there. Plus, he doesn't want to get pressured into reflating prices because the market tanks and the fed has to lower rates to put a floor under the market. That's the inevitable fed response to a crash, and he doesn't want to go down that road since that poses a serious threat of a return to stagflation...with rising prices and no commesurate increase in economic activity. We have had the opposite for awhile, and this poses a real risk, IMO. He would look and feel pretty silly raising rates now, watching the market crash, and having to lower them again because of public outrage. Not an enviable position, and AG is too smart to get suckered into that. j.o. PS - As someone else wisely stated earlier on this thread, the threat of a rate rise is often more effective than implementing it, due to "Buy the rumour, sell the fact" psychology. Rates are already up, so Greenspan's work has been done for him.