Whether it's 7 percent or 7.3 percent the point remains the same: Growth is really strong and what's obviously an issue is how long this going to continue and what are we going to see going forward for the first few quarters of 2000.
What it's all adding up to is an economy that's starting to show signs of slowing down. It's not happening very quickly but the earlier Fed rate increases are having an effect.
Inflation is great. But if we're going into a slower growth period with inflation at those levels, it's going to slow down from here?I would think that consumers have more and more confidence that the Fed is doing its job.
Greenspan is trying to be cautious by tapping the brakes ever so lightly, which I think will mean another quarter-point increase soon. This thing has so much momentum that, even though we've raised the speed limit, we're still going a little too fast.
The problem is not what's going on now; things are wonderful -- it's what could potentially happen in the future that the Fed and Greenspan are protecting us from. The economy is chugging along at a pace that's really exceeding the speed limit and that could cause some damage in the long run.
It's important to stress that we do have some very good things going on in this economy, which Greenspan reiterated yesterday. What we should be thinking about is that this is a move that's designed to be a little bit preemptive to make sure that this rapid growth does not start resulting in higher inflation.
It just really puts an intense focus on all of the economic indicators going forward. I suspect that the reaction to those numbers is going to be enhanced from what it used to be.
If you have growth that really does start to slow, that will relieve the intensity that the Fed somehow has to scrunch the economy right away.
If those numbers come in as expected, you can pretty much bet on a seeing a major rally in the markets. The expectations will be that, so long as wages are tame, the Fed will bide their time and leave rates alone.