Not many people were expecting the Fed to raise both the Discount Rate and the Federal Funds Rate on 24-August-1999, but readers of the Global Markets Anticipator were!

For nearly two weeks prior to the 24-August FOMC meeting, we were suggesting that the Fed would not only increase the Fed Funds Rate, but also nudge the Discount Rate higher by 25 basis points. We felt then, and still believe that another rate increase is not likely anytime soon, but that the Fed did not want to be that bullish to the stock and bond markets. An assymetric bias to tightening would have given too harsh a signal, but an increase in the Discount Rate fit the bill exactly. This move should lead to general range trading going forward for stocks, bonds and the dollar, though our overall bias is bullish both stocks and bonds, and after 2000, the dollar too.

On 25-September-1998 we wrote: [If the Fed only cuts 25 basis points], they will be forced to shave rates [again] before the next meeting.

We never wavered from our call for an inter-meeting rate cut. On 15-October-1998, we again reiterated our expectation and recommended purchase of October Fed Funds futures to our clients!