J.P. MORGAN<JPM> SAYS DLR MAY PREVENT FED EASING
The relatively high level of real U.S.
interest rates suggests that there is scope for further
declines in money market rates, but the Federal Reserve is
unlikely to promote such a drop as long as the dollar remains
volatile, said J.P. Morgan and Co Inc chairman Lewis Preston.
    He said in response to a reporter's question after the
bank's annual meeting that money market rates could decline
further but, "I don't think the Fed is going to encourage that
as long as the exchange markets are as volatile as they are."
    On the other hand, he said that, barring a collapse of the
dollar, he did not see rates going much higher.
    He said that Morgan's recent rise in its prime lending rate
was "purely a reflection of an increase in a whole spectrum of
rates."
    Preston reiterated earlier company forecasts that the U.S.
economy should show roughly 2.5 to three pct real growth this
year.
    He also said that as a consequence of the dollar's decline
and oil price rises, inflation would rise "moderately" to a 3.5
to four pct rate in 1987.
 Reuter
