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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Fed Official Warns Of Further Rate Hikes

Compiled From Wire Services

A leading moderate on the Federal Reserve Board warned Thursday the economy may be overheating, underscoring the widespread expectation that the central bank will raise interest rates further.

“The economy appears to be growing at an unsustainable above-trend pace,” said Laurence H. Meyer, a Clinton appointee.

Before the Fed’s last tightening move, on March 25, Federal Reserve Chairman Alan Greenspan dropped broad hints it was coming. The quarter-point increase in the benchmark rate charged on interbank loans, and the anticipation of more, roiled markets for weeks afterward. The Dow Jones average of industrial stocks fell steadily to as much as 10 percent from its mid-March peak.

Though they barely disturbed the market, Meyer’s remarks were seen as a warning of more to come when Fed policy-makers meet on May 20.

“This virtually clinches the argument that the Fed will tighten further at the May meeting,” said economist David Jones of Aubrey G. Lanston & Co. in New York. “This may, in a sense, be the second shot across the bow.”