NEWS SOURCES | ARCHIVES OF PAST MONTHS

There's Always a 'But' The Washington Post 4/22
Federal Reserve Chairman Alan Greenspan said yesterday that the U.S. economy is growing robustly and the labor market is improving without generating broad inflation pressures. Greenspan, in testimony to the Joint Economic Committee of Congress, repeated his recent warnings that the Fed will have to raise interest rates "at some point" to head off inflation. But he also appeared to be in no hurry to push up rates, citing weak wage growth, rising business efficiency and other forces that have restrained consumer price inflation and "should continue to do so for a time."
By Nell Henderson

Dollar Jumps on Hawkish Greenspan Comments The Financial Times 4/21
The dollar rallied to multi-month highs on Wednesday in the wake of hawkish comments from Alan Greenspan, the chairman of the Federal Reserve. Mr Greenspan said deflation was no longer a threat to the US economy, calling into question how long the Fed will maintain interest rates at a 46-year low of 1 per cent. "Greenspan has laid down the gauntlet. The deflation dragon is slain and the inflation hydra is blooming," said David Gilmore, a market commentator at FXA.
By Steve Johnson in London The Financial Times

Nation Chained to Rates Washington Post 4/19
In the world of interest rates, "normal" is something Americans haven't experienced for a while. During the past couple of years, consumers have been spoiled by opportunities to borrow at rates that were last available generations ago. They happily took advantage of that cheap credit to buy bigger homes and fancier cars, while running up debt on their credit cards and home-equity lines. Now that rates appear to be headed toward some semblance of normal, a considerable amount of adjustment is likely to be in store for America's debt-laden economy, as car buyers are weaned from interest-free financing, homeowners get socked with higher charges on their equity lines and monthly credit card bills rise.

Borrowing costs are still far below the inflation-bloated levels of the 1970s and 1980s, of course, and nobody can be certain that the latest run-up won't be reversed. But economists are nearly unanimous in agreeing that because of the recent improvement in the employment picture and this week's report of an increase in consumer prices, the Federal Reserve will start lifting the short-term rates it controls later this year. And the financial markets have already sent longer-term rates upward, with the yield on the benchmark 10-year U.S. Treasury note hitting 4.34 percent yesterday, compared with 3.85 percent six weeks ago.

Mortgage lending accounts for more than three-quarters of all household debt. Many economists fell that has become mostly fixed rate as rates have dropped. Still, other economists worry some about home equity credit lines, which soared from $150 billion in 2000 to $346 billion at the end of last year. These are generally tied to the prime lending rate, which has remained low but is almost certain to rise in coming months once the Fed starts nudging its own short-term rate higher.
By Paul Blustein and Nell Henderson

Consumer Price Index Jumps New York Times 4/16
The March Consumer Price Index showed a surprising jump of 0.5 percent from February and a three-month trend that would translate to an annual inflation rate of 5.1 percent. The numbers have convinced many economists that the Federal Reserve will raise interest rates this summer to forestall an inflationary burst.

And yet, the broad array of goods and services shows a mixed picture. Gas at the pump has shot through the roof, and rates for service industry categories like hotel rooms and cancer screenings have continued to rise. But prices for a swath of manufactured products, from shoes to television sets to cars, remain stable or are even falling, as competition from low-wage labor overseas keeps a lid on prices here.

Economists acknowledge that a surge in commodity prices - everything from oil to steel to wood - is putting upward pressure on inflation. A recovering economy is also giving companies somewhat more leeway to try to raise their prices to consumers.

Yet competition from low-wage producers abroad, combined with generally stagnant wages in the United States, has convinced many economists that inflation is not about to catch fire.

Recent Economic News Articles

Wall Street Journal 3/22/04 -   The OPEC nations "are hitting their limit to produce light, sweet crude, the preferred grade of oil used to make gasoline, especially in the U.S.," the Wall Street Journal reports. "By one estimate, global refining capacity could fall behind world demand as early as this year."

Washington Post 4/01/04 - OPEC oil ministers agreed Wednesday to proceed with a 4 percent cut in oil production beginning Thursday, turning aside criticism from industrial countries that any resulting price rise will hurt the world economy.

Washington Post 3/26/04 -   Fed Continues on 'Patient' Path Federal Reserve officials will have to decide "in coming years" when to raise interest rates from low levels that spur economic growth, being careful not to brake the expansion by acting too soon, Fed Governor Donald L. Kohn said yesterday.

"A principal challenge facing the Federal Reserve in coming years will be to return monetary policy from its current, stimulative stance to a more neutral posture," Kohn said in a speech to the National Association for Business Economics, which is meeting in Washington.

Kohn echoed other Fed officials who in recent days have repeated that the central bank will be "patient" in deciding when to start raising rates because inflation remains very low, hiring has been sluggish and businesses continue to have plenty of unused production capacity.

Several Fed officials, including Chairman Alan Greenspan, have said in recent weeks that their target cannot remain so low indefinitely.
By Nell Henderson     

Washington Post 3/27/04 -   Consumer Income Up More Than Spending American consumers' incomes rose more sharply than their spending last month, the government reported yesterday.

Personal income increased 0.4 percent in February, on a seasonally adjusted basis, slightly better than the 0.3 percent gain the month before, the Commerce Department said.

Meanwhile, personal spending rose 0.2 percent in February, a pullback from the strong 0.5 percent increase the previous month.

The numbers show "consumer spending slowed in February, but remains on pace for solid growth this quarter," Peter Kretzmer, senior economist with Bank of America Corp., said in a note to clients yesterday.

Strong consumer spending, fueled by low interest rates and a series of tax cuts, has largely propelled the economy's recovery from the 2001 recession. Many economists expect consumer spending to grow at a healthy pace in coming months, in part because of the tax refunds many households are receiving this spring, following the latest tax cut.
By Nell Henderson     

TOP OF PAGE | CLOSE WINDOW

Questions Raise Issue of Tighter Charity Regulation

State and federal officials charged with overseeing charitable activities around the country are promoting legislation to enhance accountability, encourage greater limits on executive compensation and place greater responsibility on nonprofit boards.

The moves come after a string of reports over the last year or so have called into question nonprofit practices ranging from making favorably priced loans to insiders to overvaluing noncash donations like land, cars and patent rights for tax deductions.

"We are seeing more mischief in this area than I think we've seen before," said Thomas F. Reilly, the attorney general for Massachusetts.

Mr. Reilly is circulating draft legislation that is similar to measures passed two years ago by Congress to tighten accountability in the corporate sector after scandals at Enron, WorldCom, Tyco and other companies raised questions about governance standards and ethics.

The Massachusetts legislation would require charity and foundation executives to certify the accuracy of their financial statements, create independent audit committees at nonprofit groups with more than $750,000 in revenue, and maintain tighter control over compensation, among other things.

Similar bills are pending in California and New York, and Congress is reviewing several charity issues with an eye toward imposing stricter rules on the nonprofit sector.
Stephanie Strom NY Times