Economy - Wednesday

Fed: Hedge funds OK as they are

Fed chief Ben Bernanke said the gov't shouldn't regulate the $1 tril hedge fund industry despite critics who say more supervision is needed due to large bankruptcies in recent years. Bernanke said investors "have become considerably more sophisticated" at managing risk. He said they, rather than the gov't, should exercise vigilance.

The Mortgage Bankers Association's mortgage applications index fell 0.4% to 646.6 in the week ended Friday, the 4th straight decline, as interest rates rose. Refi activity fell but applications for buying a home climbed. The share of adjustable-rate loans fell to the lowest total in nearly 4 years amid growing fears about ARMs and less attractive rates vs. fixed mortgages. Senate Banking Committee head Chris Dodd, D-Conn., told Market News that he's concerned the subprime mortgage crisis "may be growing a bit." He accused regulators of failing to protect consumers and said he's considering a legislative response to the problem. IMF sees strong global growth

The International Monetary Fund still sees world economic growth at 4.9% this year, down from 5.4% in '06. It downplayed risks from the U.S. housing slump, higher financial market volatility and inflation. "The world economy still looks well set for continued robust growth in 2007 and 2008," the IMF said. It said slower U.S. growth will have limited impact abroad.

The IMF cut its U.S. growth forecast to 2.2% from 2.9%, citing the housing slump and lower retail and durable goods sales. It said the U.S. doesn't face a recession, but warned of subprime lending risks. It sees growth of 2.8% in '08. The IMF raised its '07 growth forecast for the 13 countries using the euro to 2.3% from 2%. That's still below the 2.6% growth last year. The European Central Bank should lift interest rates to keep a lid on inflation, it said. Japan machinery orders dip

Core private-sector machinery orders fell 5.2% in Feb. from Jan., the gov't said. "It is weaker than expected, but this alone does not mean that capital spending will falter," Kiichi Murashima, an economist at Nikko Citigroup., told Reuters. Orders rose 3.9% in Jan., the biggest gain since Aug.

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