Fed Action Inches U.S. Closer to Possible Y2K Hangover

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Today's Fed Action Inches U.S. Closer to Possible Y2K Hangover 03:13 p.m Nov 16, 1999 Eastern NEWARK, N.J.--(BUSINESS WIRE)--Nov. 16, 1999--The Prudential Insurance Company of America's Chief Economist Susan Hickok expressed "mild disappointment" at today's Federal Reserve decision to raise interest rates, saying current data suggests the soft landing has already arrived. "Today's Federal Reserve action means post-Y2K anxieties could very well turn into a Y2K hangover," says Hickok.

Hickok says current growth is directly tied to Y2K anxieties, and as inventory destocking and consumer spending falls back to pre-Y2K concern levels, growth will be depressed early next year. She notes today's rise in interest rates seems an overreaction to temporary strong growth and could lead to a poor U.S. economic performance at the beginning of next year.

"The numbers on GDP growth, prices, consumer demand and jobs indicate a soft landing has arrived, meaning the rate hike could push us much closer than we should be to a sluggish new year," stresses Hickok.

-- Roland (nottelling@nowhere.com), November 17, 1999


If Y2k ends up being just a "hang-over", I will definately take care of it with the 'ole "hair of the dog" remedy. We can all meet here & drink Champagne oh say around March?

-- PeirreJoet (karlacalif@aol.com), November 17, 1999.

I used to work with Susan Hickok at the NY Fed. I assure you that she is a VERY conservative economist when it comes to forecasting.

She's saying that the Fed Board just screwed up. She might not be alone in that opinion.

She's probably right, but this is the first time that I have seen an economist go on record as reporting a Y2K-expectation inventory buildup-slowdown effect, let alone one which has already begun occuring. Yeah, Yardeni has some graphs on his web site, but he doesn't always show the most recent (or even necessarily relevant) data.

Attributing recent surge in GDP to Y2K inventory buildup is something I have yet to see until now.

I'm sure that Susan is no doomer like me, or she wouldn't still be working in Newark, but to have a mainstream economist talking about a Y2K hangover is huge for me, and even larger that it is someone whose work I have known.

-- nothere nothere (notherethere@hotmail.com), November 17, 1999.

If the Fed didn't raise interest rates yesterday the DOW and the NASDAQ would have gone half way to the moon. The Fed is also trying to inhibit asset inflation and the leviathan bubble that has formed.

-- Guy Daley (guydaley@bwn.net), November 17, 1999.

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