Summary

Source CONUS Archive
Record ID 82919
Story Slug ADVANCER: INTEREST RATES
Format PKG
Date 5/18/1994
Archive Time 35:17
TRT 1:28
Supers New York, NY The White House Allen Meltzer, Economist/American Enterprise Institute
Video Description NEW YORK STOCK EXCHANGE, SOTS, FEDERAL RESERVE, LUMBER MILLS.
Script LEAD: ON WALL STREET AND IN WASHINGTON THEY'LL BE WATCHING THE MARKETS TODAY. LOOKING FOR REACTION TO YESTERDAY'S DECISION BY THE FEDERAL RESERVE TO RAISE INTERST RATES HALF POINT. MIKE MCKEE REPORTS. SCRIPT: THE FIRST THTREE TIMES THE FED RAISED INTERST RATES THIS YEAR, THE STOCK AND BOND MARKETS WENT INTO FREE FALL. BUT THE INITIAL REACTION TO THIS LATEST MOVE HAS BEEN POSITIVE. THE DOW CLOSED UP YESTERDAY, WHILE BOND PRICES ROSE. AND THERE IS NO REASON, THE PRESDIENT SAYS, THEY SHOULDN'T CONTINUE. SOT IN FACT, ITS THE PROSPECT OF INCREASED GROWTH WHICH SPURRED THE FED TO RAISE BOTH THE INTEREST RATE IT CHARGES BANKS TO BORROW, AND THE RATE BANKS CHARGE EACH OTHER. IF THE ECONOMY EXPANDS TOO FAST, THERE COULD BE SHORTAGES OF RAW MATERIALS AND LABOR. AND THAT COULD TOUCH OFF INFLATION. THE FED GOVERNORS ARE GAMBLING THEY CAN MODERATE GROWTH TO PREVENT THAT, WITHOUT STOPPING THE ECONOMY COLD. SOT THE ANSWER WIL BE MONTHS IN COMING. IN THE SHORT TERM, CONSUMERS AND COMPANIES CAN LOOK FORWARD TO PAYING HIGHER INTEREST RATES FOR MANY TYPES OF LOANS. BUT THE LONG TERM OUTLOOK WILL DEPEND TO A GREAT EXTENT ON WHETHER WALL STREET BELIEVES THE FED AHS HIT ITS TARGET. RATE HIGH ENOUGH TO CHOKE OFF INFLATION, WITHOUT CHOKING OFF GROWTH. MIKE MCKEE IN WASHINGTON.
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