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MORE EVIDENCE OF SLOW RECOVERY; MARKETS ADJUSTING TO BENIGN OUTLOOK

MORE EVIDENCE OF SLOW RECOVERY; MARKETS ADJUSTING TO BENIGN OUTLOOK
 NEW YORK, April 6 /PRNewswire/ -- The following was released today by Eugene J. Sherman, senior vice president and chief economist of the Federal Home Loan Bank of New York:
 In late 1991 through the first week or so of 1992, the market consensus was that the economy was declining and there would be more monetary stimulus soon. Interest rates and the dollar were declining. By January 10 expectations reversed, based in large part on indications that fiscal stimulus would be forthcoming. The dollar and interest rates started on a nine-week ascent. The belief spread that there would be fiscal stimulus, perhaps monetary stimulus, and that the economy, perhaps soon, but certainly later, would rebound smartly. Since the middle of March a more realistic assessment has taken hold. Both fiscal and monetary stimulus this year now seem unlikely and the economic data provide evidence that the recovery is proceeding, but slowly. As a result, interest rates and the dollar have been eroding and seem likely to continue to do so a while longer.
 The outlook is benign. The recovery is likely to proceed at a moderate rate, enough to forestall fiscal and monetary stimulus but not so much as to reignite inflationary pressures. With short term interest rates likely to remain steady, the sharply sloped yield curve can flatten, with intermediate and long-term rates moving somewhat lower. However, we do not expect interest rates at any maturity to move below the lows of early January since those levels were predicated on an excessively bearish outlook for the economy. With regard to the economic evidence, early reports for March confirmed slow growth while February figures reinforced the notion that February marked an economic reacceleration.
 So with the benefit of recent data and perspective, we are satisfied with our forecast: we look for slow to moderate recovery, abating inflation, stable monetary policy, no fiscal stimulus and somewhat lower intermediate and long-term interest rates.
 -0- 4/6/92
 /CONTACT: Eugene J. Sherman, senior vice president of Federal Home Loan Bank of New York, 212-912-4605/ CO: Federal Home Loan Bank of New York ST: New York IN: FIN SU: ECO


TQ-OS -- NYFNS1 -- 5158 04/06/92 07:30 EST
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Publication:PR Newswire
Date:Apr 6, 1992
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