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To: GST who wrote (60326)	6/3/1999 8:51:00 PM
From: BGR	Respond to of 164684

GST, Let's assume for a second that AG thinks that the economy is in no risk of inflation (this, quite possibly, is an incorrect assumption, but let's assume it for the sake of the discussion). However, a steep yield curve is no good, so the Fed needs to flatten the yield curve. To achive this, the Fed may simply start buying back treasuries at 90 cents on the dollar w/ the assumption that given the future outlook of inflation in the economy it is a steal at these prices. So, rising rates is not the only tool the Fed has in adjusting the shape of the yield curve. -BGR.