To: Jo_Bidou who wrote (18915 ) 5/30/2000 3:34:00 PM From: faro Respond to of 77509
Article int‚ressant trouv‚ sur RB: Faro Article: Further Interest rate rise UNLIKELY Another good rationale why further interest rates rise unlikely, or at an end. This lends further support of a June/July stock market rebound. Bottomline: Stay invested/accummulate in UBS. Here are a few quotes from today's National Post/FP article, which follows: "So dramatic have the aftershocks been, believes economist Vincent Lepine, that the Fed is unlikely to hike rates again this summer, as many observers are predicting.. "We are concerned that conditions in these regions could deteriorate dramatically and spill over to other regions," said Mr. Lepine, senior economist at National Bank Financial in Montreal, in a report yesterday. "If the Fed continues to hike rates aggressively, the risks of another global financial crisis will rapidly mount," he concluded.. "Mr. Lepine, however, believes rate increases from the Fed are almost at an end." Hanuman .ARTICLE........................ Fed rate hike puts brakes on global economy Hong Kong, Argentina hit Paul Bagnell Financial Post The global economy, already trembling after the U.S. Federal Reserve Board's interest-rate hike of half a percentage point two weeks ago, is at risk of a serious slowdown, a senior Canadian economist warned yesterday. In much of the world, stock markets are down and corporate debt has become sharply more expensive in the wake of the Fed's attempt to stamp out inflationary pressures in the U.S. economy. So dramatic have the aftershocks been, believes economist Vincent Lepine, that the Fed is unlikely to hike rates again this summer, as many observers are predicting. Slumping economies in Hong Kong and Argentina, countries which have pegged their currencies to the U.S. dollar, have been forced to raise interest rates at the worst possible time. Both countries are suffering from deflating prices and slumping stock markets as their economies struggle to emerge from recessions. "We are concerned that conditions in these regions could deteriorate dramatically and spill over to other regions," said Mr. Lepine, senior economist at National Bank Financial in Montreal, in a report yesterday. "If the Fed continues to hike rates aggressively, the risks of another global financial crisis will rapidly mount," he concluded. Mr. Lepine, however, believes rate increases from the Fed are almost at an end. Certainly, the Fed has shown a willingness in the past to take global economic conditions into account. In late 1998, when the world was reeling from the effects of the Asian economic crisis, the Fed lowered rates by three quarters of a percentage point. Interest-rate changes affect the amount of money available to finance business growth. Sitting at the centre of the global economy, the Fed is effectively the world's central banker. Countries which peg their currencies to the U.S. dollar, for instance, give up control over their domestic interest rates, allowing their rates to move with the Fed's moves. In Hong Kong and Argentina, this now means rising borrowing costs at a time of economic weakness. In "non-pegged" economies, the effects of Fed moves can also be dramatic. For instance, the massive selloff in technology stocks in the U.S., brought about at least partly by the Fed's tightening, has been mirrored on stock markets in other countries. Technology companies around the world now find it almost impossible to raise money on stock markets. And debt markets react by widening the gap between rates payable on corporate bonds versus government debt issues. That also makes it tough for companies to finance growth. The value of currencies not pegged to the U.S. dollar often falls when U.S. interest rates climb. Lately, the Canadian dollar has weakened, along with the Australian and New Zealand dollars. All three countries are dependent on exporting raw materials to foreign markets, and the recent currency declines appear to be a prediction by markets that global economic growth is poised to slow. "The danger is that weakening currencies will press the central banks to hike rates much more than would otherwise be required, ultimately hurting their countries' economies," Mr. Lepine said