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Experts Expect U.S. Interest Rate Hike

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Reuters

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Mar 24, 1997, 3:00:00 AM3/24/97

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<A HREF='http://www.clari.net/'>ClariNet</A> <CLARI-ITEM TYPE>story</CLARI-ITEM> <CLARI-ITEM SLUGWORD>NEWS-ECONOMY</CLARI-ITEM> from <CLARI-ITEM FROM>Reuters</CLARI-ITEM> 
<H1><CLARI-ITEM HEADLINE>Experts Expect U.S. Interest Rate Hike</CLARI-ITEM></H1>
<CLARI-ITEM COPYRIGHT>Copyright 1997 by Reuters</CLARI-ITEM> / <CLARI-ITEM DATE>Mon, 24 Mar 1997 23:21:09 PST</CLARI-ITEM>
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 WASHINGTON (Reuter) - The Federal Reserve Board looked set
to raise interest rates on Tuesday for the first time in more
than two years, in a bid to stay a step ahead of inflation and
keep the economic expansion on track, analysts said.
 With growth strong and jobs plentiful, analysts said the
inflation-wary central bank was likely to decide that it had
less to lose by raising rates than leaving them unchanged.
 ``The case for a tightening (of credit) is a pretty good
one,'' said Joel Prakken, chairman of St. Louis-based
Macroeconomic Advisers. ``The chances of it are pretty high.''
 Financial markets were primed for a quarter percentage point
rate increase by the Fed. After sagging last week in
anticipation of tighter credit, the Dow Jones industrial average
of blue chip shares soared 100.46 points on Monday.
 Analysts said investors were looking beyond Tuesday's
expected rate increase and anticipating a continuation of the
economic expansion, which turned six years old this month.
 The central bank's Federal Open Market Committee was
scheduled to begin its policy-making meeting at 9 a.m. EST (1400
GMT). It was expected to announce its rate decision sometime
around 2:15 p.m. (1915 GMT).
 A rate increase would be the Fed's first since Feb. 1995 and
would mean higher borrowing costs for everyone from consumers
using credit cards to companies financing inventory.
 Fed Chairman Alan Greenspan laid the groundwork last week
for higher rates by stressing the importance to the economy of
keeping inflation down.
 ``If we allow that to get away, we will at the end of the
day find that we have set in motion a set of forces which bring
the long, sustainable, stable recovery to an end,'' the central
bank chief told Congress's Joint Economic Committee.
 He pointed to the tight labour market in particular as a
potential source of concern, voicing worries that it could lead
to excessive wage demands and rising inflation.
 Many lawmakers, though, seemed unconvinced and questioned
why rates should be raised now when inflation is low.
 ``If the Fed goes ahead and pulls the trigger, you're going
to see a real outcry,'' said Roger Hickey, co-director of the
Campaign for America's Future, a liberal think tank in
Washington.
 He said President Bill Clinton should sprearhead the
political protest against any Fed rate increase. ``It's better
for the next recession to be known as the Greenspan recession
than the Clinton one,'' he said.
 For their part, Clinton administration officials do not seem
all that concerned about the possibility of a modest rate
increase by the independent central bank because they believe
the economy is strong enough to withstand it.
 After expanding at a brisk 3.9 percent annualized pace in
the fourth quarter of last year, the economy looks to have
slowed slightly in the first three months of this year to a
growth rate closer to 3 percent, analysts said.
 With the economy enjoying strong momentum, many analysts
believe that the central bank will need to raise rates more than
once to keep inflation in check.
 ``This will not be the last tightening,'' said James
Griffith, senior vice president at Aeltus Invesment Management
of Hartford, Connecticut.
 He maintained Greenspan has trained his sights on the stock
market -- the Fed chief suggested last month that equity prices
may be too high -- and said that too argues for further rate
increases by the central bank.
 Other analysts were not so sure. Prakken said he expects the
economy to slow further in the months ahead -- whether or not
the central bank raises rates on Tuesday.
 The Fed has not changed monetary policy since Jan. 31, 1996,
when it cut rates by a quarter percentage point.
 Its target for the federal funds rate -- the rate that
commercial banks charge each other for overnight loans -- stands
at 5.25 percent. Its discount rate -- the rate it charges the
banks for money -- is 5.0 percent.
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Reuters

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Mar 25, 1997, 3:00:00 AM3/25/97

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<A HREF='http://www.clari.net/'>ClariNet</A> <CLARI-ITEM TYPE>story</CLARI-ITEM> <CLARI-ITEM SLUGWORD>NEWS-RATES</CLARI-ITEM> from <CLARI-ITEM FROM>Reuters</CLARI-ITEM>

<H1><CLARI-ITEM HEADLINE>Experts Expect U.S. Interest Rate Hike</CLARI-ITEM></H1>

<CLARI-ITEM COPYRIGHT>Copyright 1997 by Reuters</CLARI-ITEM> / <CLARI-ITEM DATE>Tue, 25 Mar 1997 7:21:43 PST</CLARI-ITEM>
</CLARI-ITEM HEADER>
<CLARI-ITEM STORY>
 WASHINGTON (Reuter) - The Federal Reserve Board met Tuesday,
apparently ready to raise interest rates for the first time in
more than two years in a bid to stay a step ahead of inflation

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