The markets are saying (a rate hike) is not only justified, but it's good news. It remains to be seen whether the economy will be stronger than we anticipate.
"Wayne D. Angell" is an Economist and was Governor of the Federal Reserve Board.
More Wayne Angell on Wikipedia.Alan Greenspan tends to give a tougher talk in a speech when he is not going to raise rates than he does when he is going to raise rates. He either barks or he bites, and I think he is barking.
No one should interpret the remarks as being a prelude for the Federal Reserve raising the Fed funds rate at the December or February meeting. That's not going to happen. If that was going to happen, the chairman wouldn't have made a speech to puncture the exuberance.
The world's central banks have certainly decided U.S. Treasury notes are a better long term investment than gold.
I've never seen a time when there's been such a blow-up of the kind of risk to the U.S. economy. We've taken a 2 percent trade drag for the first three quarters of 1998 and yet we're still averaging a 3.25 percent growth rate for these first three quarters.
We're not likely to get the bond yield moving through that 4.75 percent level until we get past all this turmoil that is now in the market.
He is not going to give that much of an indication on his own, because this Fed chief is an effective politician.
The Federal Reserve engages in a series of rate hikes at the tail end of an expansion when inflation is accelerating. What the Federal Reserve has done today is they made that less likely and thereby this expansion is more apt to go on as long as the year 2000.
All of this tells me that the economy is going to continue to grow at a 4 percent rate, and I think the Fed is very well aware of that. Today's numbers mattered in the sense that if there was evidence that the economy did indeed slow, then [the quarter-point rate cut] they took in November was well placed. But that clearly isn't happening.
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