There were no major reports of economic news today. But, by my present count, there will be something like 15 different data releases coming out during the remainder of the week. Of greatest interest will be the Fed's announcement of what it intends to do regarding interest rates.

Tomorrow and the next day the Federal Open Market Committee will meet to discuss the status of the economy and decide whether to act to further lower interest rates. Last December, Fed Chairman Greenspan commented that the move then to lower the Fed Funds rate was fostered by evidence of a favorable inflation environment and moderation of inflation expectations. Well, if its evidence of slow inflation that he's looking for, there has been plenty of that since the last FOMC meeting:

On December 21 the Philly Fed reported its November Current Prices Paid Index declined from 12.3 to 3.0, the lowest reading in almost four years.

On January 2 the National Association of Purchasing Management reported that its December Prices Paid Index fell from 44.5 to 40.8, the lowest level for that Index since 1991.

On January 17 the Conference Board released its report on the Composite Index of Leading Economic Indicators (LEI) for November. The two component indicators that contributed the most to the 0.3% drop in the Index were the Sensitive Materials Price Change Index (an inflation index), and Vendor Performance (an indicator that Chairman Greenspan allegedly watches closely for signs of inflation).

On January 19, in its preliminary estimate of the Gross Domestic Product for the third quarter of 1995, the Commerce Department reported that the GDP deflator (another measure of inflation) had only risen at an annualized rate of 2.4%.

On January 22 the Columbia University Center for International Business Cycle Research reported that the December value for its Leading Inflation Index had dropped to 103.6 from a November reading of 103.8. This is another indicator that Chairman Greenspan reportedly watches very closely.

So, there's no lack of evidence that inflation is under control.

And, there's no lack of evidence that the economy is in a slump.

The Fed needs to look no further than its own in-house coincident indicator of economic activity, The Index of Industrial Production. In December, this Index rose only 0.1%. Had it not been for the return of striking Boeing workers, the Index would have been unchanged. Between February and December of last year the Index grew at an anemic annualized rate of 1.08%. This compares with an average growth rate of 4.9% during the four preceding years.

Moving from production to consumption, the year-over-year gain in retail sales during the past holiday shopping season was the worst in 10 years. What evidence could more eloquently send the message that people and businesses all over the country are financially distressed?

Will the Fed act to lower interest rates this week? There seems to be overwhelming evidence that it should. My guess is that it will.

Byline: Lafferty (MF Merlin)