Hurricane Floyd and the Fed: Happy Together

By Frank Pellegrini Wednesday, Sept. 15, 1999

The market's mind was on Greenspan again Wednesday as a tame inflation number — a 0.3 percent hike in the Consumer Price Index, with just a 0.1 hike in the "core" rate — sparked a 100-point rally that traders promptly sold off for fun and profit. On the Fed watch, TIME senior economics reporter Bernard Baumohl figures today�s number and yesterday�s �- a mildly alarming boost in retail sales �- cancel each other out. "My sense from the last meeting was that the Fed was done unless it saw some clear and unambiguous evidence that inflation was on the rise," he says. "And there certainly hasn�t been any of that." Plus, says Baumohl, there�s one more good reason that the Fed will stand pat next month: Greenspan�s mind is on Floyd.

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"This is one of the most threatening hurricanes ever to menace the U.S., and it�s headed for the Southeast and Northeast, where a lot of economic activity is," says Baumohl. "People�s minds are going to be on being safe and protecting their property — not going to the mall." Look for retail sales to dampen considerably for a week or so — and therefore for the month — as folks covering their heads sit on their wallets. Which ought to put the Fed�s mind at ease when September�s numbers come out, just in time for the FOMC board�s next interest-rate sit-down in October. "This still looks like the Goldilocks expansion in place — it�s just right," says Baumohl. And as bears go, Floyd is like Smokey: keeping the economy from catching fire.