O petróleo está em queda, mas a incerteza continua em alta

[MSM]

Sept. 11 (Bloomberg) -- Federal Reserve Governor Frederic Mishkin joined San Francisco Fed President Janet Yellen in flagging an increasing threat to consumer spending, differing with officials who still see signs of economic strength.

Mishkin said late yesterday in New York that ``heightened uncertainty'' in markets could hurt consumers, after Yellen said demand is under ``downward pressure.'' By contrast, Dallas Fed President Richard Fisher was ``generally encouraged'' about the economy, and Charles Plosser of the Philadelphia Fed said Sept. 8 there are ``a lot of conflicting data.''

The scope of remarks may reflect debate inside the central bank over whether to lower the benchmark interest rate on Sept. 18 by a quarter-percentage point, or a half-point as some investors expect, Fed watchers said.

``They might be legitimately still debating, even with the market way out in front of them,'' said Chris Rupkey, a senior financial economist at Bank of Tokyo Mitsubishi UFJ Ltd., who was present at Mishkin's address to the Money Marketeers of New York University. ``The Fed is a very deliberative body.''

Rupkey said there's no ambiguity in the Treasury market, with the two-year note yield at 3.84 percent, indicating traders anticipate a series of rate cuts. The yield is more than 1.25 percentage points below the Fed's 5.25 percent target rate for overnight loans between banks.

Policy makers are trying to gauge the economy's state after the first loss of jobs in four years in August. Atlanta Fed President Dennis Lockhart said the data now show that job growth started slowing in June. In an Atlanta speech yesterday, he backed away from remarks he made four days before that the housing slump was having a limited impact.

`Question of Magnitude'

``It sounds like everyone's marked down their growth outlook, and everyone realizes the credit-market events are something that require a Fed response,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who used to work at the Fed. ``It's just a question of magnitude.''

Treasuries rallied yesterday as traders interpreted the officials as confirming a reduction in borrowing costs to preserve the six-year expansion. Economists and investors expect the Federal Open Market Committee to lower its main rate at least a quarter-percentage point from 5.25 percent next week.

Employers cut 4,000 workers in August, the Labor Department said Sept. 7. Revised figures showed job gains diminished from a 188,000 pace in May to 69,000 in June and 68,000 in July. Mishkin said private payrolls growth has slowed to 70,000 on average in the past three months, from 165,000 in the second half of 2006.

Main Indicator

Payrolls are one of the main indicators, along with sales, wages and production, which help determine the start of economic contractions.

Lockhart and Yellen both vote on rates in 2009, and Fisher and Plosser vote next year, though they all participate in the FOMC discussions. Officials gather in Washington on Sept. 18. Mishkin and other Fed governors have permanent votes.

Mishkin and Yellen acknowledged some areas are doing better than others. Consumer and business spending appear to be holding up ``reasonably well'' based on some recent indicators. They indicated that the risks to the outlook would sway their decision on rates.

``It is critical to take a forward-looking approach -- gauging the effects of recent developments on the outlook, and, importantly, the risks to that outlook,'' Yellen said in a speech to a conference in San Francisco. Yellen, 61, is a former Fed governor and head of the White House Council of Economic Advisers in the Clinton administration.

`Severely' Affected

Mishkin said that outside of housing, growth ``could be affected more severely in other sectors should heightened uncertainty lead to a broader pullback in household and business spending.''

``That scenario cannot, in my view, be ruled out, and I believe it poses an important downside risk to economic activity,'' said Mishkin, 56, who joined the Fed Board a year ago.

Others played down the surprise loss of jobs, which economists said indicated that the sell-off in credit markets and deepening recession in housing is having a broader impact.

``Our economy appears to be weathering the storm thus far,'' Fisher said yesterday in a speech in Laredo, Texas. ``As yet, tighter credit conditions do not appear to have had a major impact on overall economic activity outside of real estate.''

`Be Careful'

Plosser said in an interview after a speech in Waikoloa, Hawaii, that ``we want to be careful not to overweight one piece of information'' referring to the job loss. He said he had not ``made up my mind at all'' on whether a rate cut is needed.

Interest-rate futures show traders expect about 0.75 percentage point of cuts in the Fed's target by year-end. The yield on the December contract closed at 4.435 percent yesterday.

``Investors' perceptions of increased downside risks have resulted in a notable decline in the rates on federal funds futures contracts,'' Yellen said yesterday. Both she and Mishkin refrained from attempting to counter market expectations.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net