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To: CGarcia who wrote (17517)	5/18/1999 2:41:00 PM
From: red_dog	Read Replies (1) \| Respond to of 41369

They have had a "tightening basis" the last 14 time and only raised rates one time.

To: CGarcia who wrote (17517)	5/18/1999 2:52:00 PM
From: Tom Tallant	Read Replies (1) \| Respond to of 41369

kind of like telling your kids..." If you get out of control...I'll ground you." <ggg>

To: CGarcia who wrote (17517)	5/18/1999 2:58:00 PM
From: Steeny	Respond to of 41369

The tightening bias was already factored in. However, the Fed wording "While the FOMC did not take action today to alter the stance of monetary policy..." was a bit stronger than many traders had expected. The word TODAY threw traders as it implies that the Fed will rise soon. (perhaps the next meeting). We will need very tame #s for the Fed not to hike soon. The market will now be looking over it's shoulder very closely. Case needs to pull us out of this.

To: CGarcia who wrote (17517)	5/18/1999 3:00:00 PM
From: Nick	Read Replies (1) \| Respond to of 41369

Here's an interesting article on the subject, before the announcement: Federal Reserve Meeting Starts; Policymakers May Be Ready to Raise Rates By John Cranford and Vincent Del Giudice (Adds latest markets in 7th paragraph.) Washington, May 18 (Bloomberg) -- Federal Reserve policy- makers meet today and analysts are betting central bankers may announce they are prepared to raise U.S. interest rates to slow economic growth as a way of keeping inflation in check. The meeting of the Federal Open Market Committee started at 9 a.m. Washington time, a Fed spokeswoman said. An announcement on Fed action, if any, is expected after 2 p.m. Washington time. If the Fed signals a change in its ''bias'' -- or position on future rate action -- the announcement might have the same effect as an increase in the overnight bank rate, and push the yield on the benchmark 30-year Treasury bond above 6 percent. ''There's a 50/50 shot now'' that the Fed will change its stance, said former Fed Governor Lyle Gramley, now a consulting economist at the Mortgage Bankers Association of America. ''If the Fed were looking for a cover they have it now,'' with a jump in prices, a rebound in manufacturing and an increase in the money supply, he said. Growth shows few signs of slowing. Moreover, last Friday brought the first hint of accelerating inflation in more than two years -- a 0.7 percent increase in the consumer price index for April, which was the biggest monthly gain in nine years. That news sent Treasury bond yields soaring and heightened concerns that the FOMC will announce it's shifted from a so- called neutral stance to a ''bias'' favoring higher rates. The price of such a bias shift ''is already in the markets,'' said William Sullivan, an economist at Morgan Stanley Dean Witter in New York. Bonds, Stocks Gain Bonds gained in New York trading. The U.S. Treasury's benchmark 30-year bond rose 3/8 point, pushing down its yield 3 basis points to 5.87 percent after the Commerce Department reported starts of new housing construction fell 10.1 percent in April -- the largest drop in more than five years. Still, the bond's yield has risen from 5 percent in January, and follows the market's biggest rout in three years on Friday, when yields rose 17 basis points. Stocks were also higher, and the Dow Jones Industrial Average rose 58 points, or 0.54 percent. In an editorial today, London's Financial Times said the Fed should raise its target today to slow economic growth and curb inflation. The newspaper said the Fed's ''repeated forecasts of a slowing economy -- just like everyone else's -- have so far been wrong. It should raise interest rates.'' The Wall Street Journal's editorial page took the opposite tack, suggesting no change in Fed policy. ''Our counsel to Mr. Greenspan and company is, patience,'' the Journal wrote. A New Tactic The immediate announcement of a bias shift -- a new tactic for Greenspan and his colleagues -- would be the latest in a series of moves to make the Fed's actions more transparent and prepare financial markets for interest-rate changes. In 1994, the FOMC started announcing decisions to change the overnight bank rate on the day it meets -- not six or eight weeks later when the minutes of the meeting are released. In January, the FOMC said it will announce bias changes immediately after meetings when it's ''important for the public to be aware of an important shift in the members' views.'' Previously, bias changes -- which can signal that the FOMC is prepared to change the overnight bank rate between meetings, as it did last October -- were announced only in the minutes. Announcing that the next interest-rate move is probably higher could also boost the Fed's credibility. ''Part of the Fed's responsibility for stability is quite literally a psychological interaction with the markets,'' said Neal Soss, chief economist at Credit Suisse First Boston Corp. in New York. That may mean the FOMC will see the need for a bias shift. ''Keeping in good graces with the markets has value,'' he said. Productivity Advances None of the economists at the 30 banks and securities firms that deal directly with the Fed's trading desk expect the FOMC to raise the overnight bank lending rate from its current 4.75 percent, according to a Bloomberg News survey. That's because Greenspan and other central bankers have made a point of attributing the economy's strength to a surge in labor productivity. Gross domestic product grew at a 4.5 percent annual rate in the first three months of the year -- faster than the 3.9 percent growth rates of the past two years. The Fed raised interest rates only once since February 1995, in part because the consumer price index was falling to a 12-year low. ''The performance of the American economy over the last seven years has been truly phenomenal,'' Greenspan said in a May 6 speech. At the same time, Greenspan cautioned that potential labor shortages and the runaway U.S. stock market may lead to rising inflation and threaten the economy, which is now in its ninth year of growth. That led some investors to conclude he was warning the Fed would act if the economy doesn't slow on its own. After Friday's report that widespread price increases pushed up consumer prices 0.7 percent in April, the biggest monthly gain in almost nine years, the yield on the benchmark 30-year Treasury bond surged 17 points to the highest in a year. ''We're at the moment where there ought to be some kind of inflation,'' Jones said. ''If domestic demand remains strong and global demand rebounds, that might begin to exert price pressure,'' he said, which is why he expects the FOMC to boost the overnight rate by a quarter point by November.