Fed's Poole says rate hikes not slowing economy

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FOCUS-Fed's Poole says rate hikes not slowing economy

ORLANDO, March 13 (Reuters) - Though the Federal Reserve has raised interest rates four times since mid-1999, there is little sign the booming U.S. economy is slowing, St. Louis Fed President William Poole said on Monday.

Poole was speaking one week before the Fed's next policy meeting at which a small increase in rates is widely expected. Fed officials have made it abundantly clear they will keep raising rates until the blazing pace of growth cools.

``I don't think that you could say that anything shows up in a statistically significant way as a consequence of previous increases in interest rates. I would not say there has been any significant slowing,'' Poole said at a panel discussion sponsored by the Common Funds Education Forum.

The policy-setting Federal Open Market Committee (FOMC) has already raised the key federal funds rate on overnight lending between banks four times since June of last year. The FOMC is expected to push fed funds up from 5.75 percent currently to 6.0 percent at its March 21 meeting.

The Fed's chief concern is that demand in the economy -- fueled partly by an enormous increase in ``paper'' wealth from the stock market and real estate market -- is outstripping the capacity to supply goods and services and that this will create inflation.

The Fed also fears the country is running out of available workers as a result of that strong demand, and that this may drive up wages and prices. And more recently, there have been jitters about rising energy prices posing an inflation threat.

Poole, who is a non-voting FOMC member this year, acknowledged there was a risk inflation would accelerate due to the recent spike in oil prices, but he said he did not see any evidence it was having a broad impact yet.

Oil prices rose last week to the highest levels since the 1991 Gulf crisis.

While industries that depend on fuel were certainly feeling the pinch, Poole said: ``I don't think it's spreading in a highly generalized fashion. As I look at the data on inflation expectations, I think it's astonishing how rock solid they've been.''

Fed officials have seemed confident the sharp rise in oil prices would only be temporary. They maintain the U.S. economy is much less sensitive to oil price swings now than it was in the 1970s.

Poole also commented on the two most recent U.S. monthly employment reports for January and February, saying they did not give a clear reading on the strength of the economy.

The jobs data were ``mostly an aberration, having to do with seasonal impact and some clouding as a consequence of Y2K'', he said.

U.S. non-farm payrolls increased by a very tepid 43,000 in February after surging 384,000 in January. But January's strong showing was due to unseasonably mild winter weather and February's weakness was seen as a ``payback'' for January.

-- Ken Decker (kcdecker@worldnet.att.net), March 13, 2000


Whew! For a minute there I thought that Steven Poole had become a Fed :^)

-- Jim Cooke (JJCooke@yahoo.com), March 14, 2000.

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