Too bad. Wall Street’s latest bout with cancer – climbing interest rates – could be a losing one. Or, put another way, Wall Street’s abysmal rate forecasters may be dead wrong again in their overwhelming view that Fed tightening is just about done.

West Coast money manager Leonard Mohr is convinced this is so. “Wall Street,”he says,”is out of whack with reality. Rates are going higher than you think and the market could suffer.”

There’s no doubting the Street’s shoddy rate prognoses. Last May, for example, with the fed funds rate at 3.25%, one Street expert after another, including heavyweights Merrill Lynch and Legg Mason, relayed the cheerful tidings to investors that the Fed,after eight straight rate increases, was in the ninth inning of the rate-hiking ball game. But with the fed funds rate having run up to 4.75% following last month’s 15th consecutive rate boost, Fed watchers, like Casey at the bat, have struck out.

Now the consensus is happily telling us once again the Fed is finally on the verge of applying the brakes, that we’ll see one or two more rate boosts of 25 basis points to 5% or 5.25%, and that is definitely it for now.

They may be right this time, but Mr. Mohr of Los Angeles-based MCR Associates sharply disagrees. He’s sticking with a decidedly contrary forecast he made last September. At the time, with the fed funds rate at about 3.5%, our contrarian predicted the rate would climb to about 6% before the Fed ended its current round of tightening.

No economist I’m aware of shares such a flamboyant rate outlook. Many, in fact, see a near-term Fed pause followed by a period of easing. Nonetheless, Mr. Mohr isn’t inclined to change his mind. “I hope you’re not hard of hearing,” he said. “I told you before and I’m telling you again. With both the economy and inflation heating up and oil now approaching $70 a barrel, likely to remain high throughout the first half, why would anyone think the Fed is about to ease up on its tightening anytime soon?”

On May 10 (the next meeting of the Federal Open Market Committee), Mr. Mohr says, “We’ll see the 16th straight rate increase – 25 basis points, that will lift the fed funds rate to 5%, and then on to 6% probably by the early third quarter.”

In contrast, many Wall Streeters think 6% is off the wall, citing, among other reasons, the potential damage it could wreak on an economy widely expected to slow in the second half, largely reflecting a slowdown in consumer spending and a further weakening of the housing market, which will erode the wealth effect.

As such, many economists, among them Mark Vitner of Wachovia and Irwin Kellner of North Fork Bank, argue that a fed funds rate of 5% or higher could easily pave the way for an economic hard landing or a 2007 recession. Accordingly, both men expect the Fed to slam the door at 5%.

Maybe so, but there was no indication of it at the FOMC’s March 28 meeting. To the contrary, pointing to rising energy and commodity prices, it indicated more firming may be needed.

That the market is ultra-nervous about interest rates can be seen in the fact that even though the rate hike on March 28 to 4.75% was widely anticipated,stock prices,which were modestly higher prior to the mid-afternoon announcement of the increase, immediately swung into the red after the disclosure. It suggests to Mr. Mohr even rougher going for the market in the face of future rate hikes.

Elaborating on his 6% outlook, he says some other factors suggesting higher rates are the widening trade deficit, a surging global economy, and the fact that rates are higher abroad than in America.

But what about projected economic slowing and the weakening housing market, both obvious deterrents to higher rates?

Mr. Mohr rejects such arguments, contending that “the economy is a lot stronger than people think it is,” pointing to, among other things, almost certain strong first-quarter GDP growth of between 4% and 5%, a strengthening job market, rising takehome pay, and a recent jump in the index of consumer confidence to the highest level since May 2002.

What about a housing downturn? “I’ve heard that from the ‘bubble crowd’ for the past two years,” he says, “and I’ll probably hear it for the next three years. Home prices are coming down, but that doesn’t mean they’ll collapse. Nothing goes up in price forever.”

His parting thought: “Don’t hold your breath the next time someone tells you the rate increases are over.”

Economist Lakshman Achuthan of the Economic Cycle Research Institute thinks a 6% fed funds rate is possible,but unlikely. Still, he acknowledges unmistakable upward near-term rate pressures and figures “a synchronized upturn in global growth will surely be followed by a synchronized upturn in rates.”

dandordan@aol.com