FED RATE HIKE MAY BE COMING; RISING PRICES COULD PROMPT INCREASE BY JUNE, ANALYSTS SAY.Byline: Martin Crutsinger Associated Press Associated Press: see news agency. Associated Press (AP) Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. Americans, who have grown accustomed to nothing but good news on inflation, got a jolt last week when consumer prices jumped by the largest amount in nearly nine years, led by a sharp increase in gasoline prices. That development will be on the table when Federal Reserve policy-makers meet today, but private economists believe it will take more than one bad number to prompt the central bank to start raising interest rates. These analysts, however, said they expect the Fed to start raising interest rates later this year, probably at the policy-makers' August meeting, to slow the economy and keep inflation from becoming uncontrollable. ``The countdown is really on for a future tightening move by the Fed,'' David Jones David Jones is a common name, particularly in Wales, and there have been several well-known individuals with this name. Variations include Dave Jones and Davy Jones. , chief economist The Chief Economist is a single position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of responsibility encompassing the at Aubrey G. Lanston & Co. in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , said Monday. ``It is no longer a matter of whether they will tighten, but when.'' The central bank last changed rates in the fall of 1998 when the federal funds rate Federal Funds Rate The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight. , the interest that banks charge on overnight loans, was cut three times to help restore investor confidence and avert a worldwide recession. The funds rate has been at 4.75 percent since Nov. 17. The rate cuts worked. U.S. markets have since returned to record levels, bolstered by low U.S. interest rates and continued strength in a U.S. economy enjoying its lowest unemployment levels in three decades. But since Friday's bad inflation report, Wall Street has grown nervous. The yield on Treasury's benchmark 30-year bond moved back toward 6 percent, the highest level in a year. The Dow Jones industrial average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. , which hit a record high Thursday, has fallen sharply. ``The best news on inflation is over,'' said Allen Sinai, chief economist at Primark Global Economics. ``That is not to say that we will have runaway inflation, but we have seen the lows on inflation.'' Few private economists expect a Fed rate increase today, but some said the central bank may employ a new signaling device Noun 1. signaling device - a device used to send signals bell - a hollow device made of metal that makes a ringing sound when struck buzzer - a signaling device that makes a buzzing sound to put financial markets on notice about the future direction of interest rates. Up until now, the central bank only announced actual rate changes after meetings of its Federal Open Market Committee, composed of Fed governors and bank presidents who gather eight times a year to set interest rates. However, at its December meeting, the Fed approved a change in policy that would allow it to signal the future direction of rates by allowing it to reveal changes in its policy directive. Since the series of three easing moves, the Fed has been in a neutral stance, meaning a rate cut and rate increase were equally likely. Many analysts expect the central bank to announce Tuesday that it has changed its policy directive from neutral to leaning toward raising rates. That announcement alone will likely push rates set by financial markets upward because it would confirm their suspicions that the central bank is leaning toward a future rate hike. Sung Won Sohn Sung Won Sohn is a renowned American economist. He was named one of the top five most accurate economic forecaster in 2001 by Bloomberg News. Sohn studied economics at the University of Florida and earned a Ph.D. in Economics from the University of Pittsburgh. , chief economist at Wells Fargo Wells Fargo armored carriers of bullion. [Am. Hist.: Brewer Dictionary, 1147] See : Protectiveness Wells Fargo company that handled express service to western states; often robbed. [Am. Hist. & Co. in Minneapolis, said a policy directive change would nudge market rates in the direction the Fed wants. It also would give Federal Reserve Chairman Alan Greenspan Alan Greenspan Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. more time to prepare for a Fed rate hike. ``If Greenspan were to raise rates (today), I think a lot of politicians would squawk,'' Sohn said. ``At this point, it would be very difficult politically and economically to justify hiking interest rates.'' While consumer prices were up in April, other recent reports showed that wage pressures remain low despite the tight labor markets. The April report of wholesale prices showed little inflation pressures in the pipeline. Many economists believe that the Fed will wait until its Aug. 24 meeting to actually increase rates, although some said the rate increase could come as soon at the June 29-30 meeting if the Consumer Price Index remains high. The Clinton administration continued to insist Monday that despite inflation jitters jitters 'Butterflies' Psychology An episode of nervousness or anxiety that often precedes a public event; jitters is a type of performance anxiety which may affect actors in a stage production–stage fright or soloist musicians; it may respond to anxiolytics , the U.S. economy remains on solid ground. ``I think if you look forward, the most likely prospect remains solid growth, low inflation,'' said outgoing Treasury Secretary Robert Rubin. |
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