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The Federal Reserve is expected to place the health of the nation's economy ahead of the well-being of the dollar and hold off from raising interest rates at a policy-making meeting on Tuesday, analysts said Sunday.

While the central bank would like to see the dollar worth more on the foreign currency market, it's not likely to raise interest rates now to try to bring that about -- especially when the domestic economy is showing increasing signs of slowing.

"I'm sure they will discuss it (the weak dollar) at some length," said Scott Pardee, a former Fed official who is now senior adviser to broker Yamaichi International in New York. "But it won't force them to push up rates at this time."

The dollar dropped to yet another record low against the Japanese yen last week, before recovering slightly on Friday.

Since the start of the year the dollar has fallen over 10 percent against the Japanese yen and 8 1/2 percent against the German mark.

Higher interest rates would make the dollar a more profitable currency for investors to hold. But the tighter credit would also tend to dampen economic growth by raising borrowing costs for companies and consumers.

The central bank's policy-making Federal Open Market Committee has already raised short-term rates seven times in the past year in an effort to engineer a soft-landing for the high-flying economy and prevent a take-off of inflation.

There are increasing signs that the strategy is starting to work. Orders for durable goods such as cars and appliances fell in February for the first time in four months. Home building dropped last month to its lowest level in a year.

And automobile dealers are complaining about declining sales. They sent a letter to Fed Chairman Alan Greenspan last week urging him not to raise rates further.

"The tea leaves seem to me to be showing a downshift in growth," central bank vice chairman Alan Blinder said.

In a clear signal that he does not believe the Fed should tighten credit further, Blinder told Reuters last week that he felt that monetary policy now was roughly balanced between the risk the Fed had raised interest rates too far or not enough.

"The most likely story is moderate growth through '96," said Fed Governor Lawrence Lindsey.

That raises the question whether the central bank has finished raising rates for the current business cycle.

Financial markets seem to think so. Wall Street stock prices soared to record highs last week as the bond market bounded ahead, bringing long-term interest rates back down to levels not seen since last summer.

David Berson, chief economist at the Federal National Mortgage Association, said the drop in long-term rates will cushion an expected slowdown in the economy and housing sales.

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