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Strategies & Market Trends : Inflation and Interest Rates -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (19)	6/3/1999 10:23:00 AM
From: Amy J	Respond to of 35

Rubin: Inflation Will Stay Low foxmarketwire.com 7.36 a.m. ET (1136 GMT) May 17, 1999 WASHINGTON — Outgoing Treasury Secretary Robert Rubin said Sunday he expected the U.S. economy to experience low inflation and solid growth in the coming months, but he warned it was risky for the world to rely on it as the only engine of economic growth. Peter Morgan/Reuters U.S. Treasury Secretary Robert Rubin said that he would step down from his job around July 4 Rubin, in an interview with ABC television, was questioned about whether the unexpectedly high jump in the Consumer Price Index for April meant the robust U.S. economy was threatened by higher inflation. "As you look forward, the most likely scenario remains one of solid growth and low inflation," said Rubin, who announced his resignation last week. Financial markets tumbled Friday after the Labor Department said its CPI, the main inflation gauge of the economy, had increased by 0.7 percent last month, the biggest monthly rise since October 1990 just before the Gulf War. Rubin said despite the good prospects for the U.S. economy, the global economy faced a number of challenges and was still suffering from the effects of the financial crisis that erupted in 1997. "We need to continue ... to work around the world to promote growth. We have at the moment an unhealthy situation in the world economy in that the United States is really the only major part of the global economy with robust growth," he said. "Most particularly, it is critically important that Japan get back on track," he added. The United States has complained repeatedly that Japan has failed to revive its economy and this has in turn exacerbated the economic downturn suffered in Asia. Rubin, who will be succeeded in July by his deputy, Lawrence Summers, said the sound U.S. economy could be preserved by saving budget surpluses for bolstering the Social Security system rather than using them up through tax cuts.

To: Amy J who wrote (19)	6/3/1999 10:26:00 AM
From: Amy J	Respond to of 35

Sales of new homes up 9.2% in April. Unexpected surge could spur reserve Board to raise interest rates. Message 9927336 Thursday June 3 12:52 AM ET Surge In U.S. Home Sales Jolts Markets By Glenn Somerville WASHINGTON (Reuters) - A surprising surge in new-home sales during April to the second fastest rate on record sent house prices soaring as buyers rushed to lock in cheap mortgages, a government report said Wednesday. The fresh sign of robust consumer activity jolted financial markets. Stock and bond prices tumbled on renewed fears that the Federal Reserve was more likely to boost interest rates to cool the economic pace, but bargain-hunting by investors late in the day restored some of the losses. The Commerce Department said sales of single-family homes shot up 9.2 percent during April to a seasonally adjusted annual rate of 978,000 -- second only to the record 985,000-unit rate set last November and sharply contrary to Wall Street economists' forecasts for weaker sales. ''It certainly complicates the proposition that a cooling-off in the housing sector has begun,'' said economist David Seiders of the National Association of Home Builders. He noted the supply of new homes on the market again matched the record low 3.7 months' worth set last November. Every region of the country except the West posted higher sales in April. Sizzling demand drove the average sales price for a new home sharply higher to a record $193,100 in April from $186,300 in March. Analysts said escalating prices were worrisome since it heightened chances that U.S. central bank policymakers would feel compelled to cool inflation pressures with a dose of higher interest rates. Economist David Orr of First Union Corp. (NYSE:FTU - news) in Charlotte, N.C. said the Fed would be on the lookout for signs that homebuyers may be starting to bid up prices in a way that could set off inflation. ''Nothing changes consumers' expectations faster than what happens to the price of their house, or the houses in their neighborhoods,'' Orr said. Bond prices tumbled after the home-sales report was issued but recovered to end down only fractionally. The yield on the bellwether 30-year U.S. Treasury bond improved slightly to 5.93 percent from Tuesday's close of 5.94 percent. Share prices on the New York Stock Exchange dropped as much as 130 points but closed down 18.37 at 10,577.89. Prices had softened before an address in Boston by Fed Chairman Alan Greenspan but traders were relieved when the U.S. central bank chief made no reference to the outlook for interest rates. The housing data complemented other recent reports, including Tuesday's National Association of Purchasing Management index that showed manufacturing gathering steam in May and offered no sign of economic slowdown on the horizon. Greenspan said recently that consumers were being emboldened by rising new-home prices and by stock-market gains to keep spending briskly. Consumer spending has been the rocket fuel behind the booming U.S. expansion, now in its ninth year of unbroken growth. The spending spree set U.S. new-car sales on target for a record year. Major automakers said Wednesday that, aside from General Motors Corp. (NYSE:GM - news) which reported declines, sales of most producers were running 5 percent higher during May than last year, reaching a seasonally adjusted annual rate of more than 17 million units. Industry executives who had expected sales to cool down credited strong job growth and low inflation for putting automakers on the road to their best sales year ever in 1999. Ford Motor Co. (NYSE:F - news), DaimlerChrysler AG (NYSE:DAJ - news), Toyota Motor Corp. (Nasdaq:TOYOY - news), Honda Motor Corp., Nissan Motor Co. Ltd., and Volkswagen AG all reported strong sales rises last month. April's sharp rise in new-home sales followed a revised 0.8 percent decline in March sales to 896,000. Previously, the department said March sales were at annual rate of 909,000. Regionally, sales fell 5.3 percent to 249,000 in the West but they jumped 33.5 percent in the Midwest to a record 211,000 a year. Northeast sales climbed 17.1 percent to 89,000 and in the South they gained 7.5 percent in April to 429,000 a year. Lending rates for 30-year mortgages dropped to an average 6.92 percent in April from 7.04 percent in March but have since moved up modestly, hitting 7.23 percent last week. Analysts said the relatively cheap lending rates in April coupled with plentiful jobs were fostering rising incomes that gave consumers the confidence to undertake long-term financial commitments. Seiders said mortgage applications were strong in April, which likely means another strong sales month for new homes in May.

To: Amy J who wrote (19)	6/3/1999 10:30:00 AM
From: Amy J	Read Replies (2) \| Respond to of 35

Thursday June 3 12:52 AM ET Greenspan Mum On Rates, Warns On Trade Full Coverage Alan Greenspan and the Federal Reserve From: reuters.com BOSTON (Reuters) - Federal Reserve Chairman Alan Greenspan Wednesday steered clear of commenting on the outlook for U.S. interest rates, instead repeating his concern over waning U.S. support for free world trade. In a speech to business leaders in Boston, Greenspan lashed out against a rising tide of protectionism in the United States and criticized the Clinton administration's trade policy as being too confrontational. But the speech gave no hints for financial markets, which were eagerly awaiting any indication on the future course of interest rates. Recent reports depicting an economy in danger of overheating have raised speculation the Fed will raise borrowing costs soon, and Greenspan did nothing to convince world markets otherwise. ''The United States has been in the forefront of the postwar opening up of international markets, much to our, and the rest of the world's, benefit,'' Greenspan said. ''It would be a great tragedy were that process reversed.'' His remarks largely mirrored a speech the Fed chairman gave in Dallas in mid-April. The U.S. dollar firmed marginally against other key currencies in reaction to Greenspan's speech. The prospect of higher U.S. interest rates tends to benefit the U.S. dollar since they would make dollar-denominated assets more attractive to hold relative to others. Greenspan, a fervent free-market advocate, said a massive rise in world competition that growing international trade had brought over the past half century had resulted in ''markedly higher standards of living'' for countries that participated in cross-border trade, particularly the United States. The central banker harshly criticized the administration's trade policies for being too focused on the goal of job creation rather than overall standards of living. He also said it was too adversarial and noted that trade was not a zero-sum game in which a gain by one player is always to the detriment of the other. ''We try to promote free trade on the mistaken ground that it will create jobs. The reason should be that it enhances standards of living through the effects of competition on productivity,'' Greenspan said. The notion of rising productivity that may have contributed to keeping inflation in check in the ninth year of an unbroken U.S. economic expansion has been a key feature in the debate about the sustainability of the nation's economic boom.