Greenspan: Ready for replay

Washington, Aug. 5 (Agencies): The Federal Reserve is expected to continue its strategy of gradually raising interest rates when policy-makers meet next Tuesday.

A raft of indicators suggest that economic growth slowed sharply last quarter, particularly in June, and may continue to be sluggish for a few more months. But Fed officials and many outside economists predict that the lull will be temporary and that activity will pick up again by the fall.

On Wednesday, the commerce department released new data on orders for manufactured products that in many ways reinforced the signs of sluggish growth.

But the economic picture is not clear and other indicators point to a renewed step-up in growth. Consumer confidence is back at high levels.

The most important evidence on the economy’s recent pulse will be released at the end of this week. And while Fed officials will scrutinise that data on the job market’s July performance, to be announced Friday by the labour department, most analysts believe central bankers are committed to raising the federal funds rate on overnight loans between banks by a quarter-point, from 1.25 per cent to 1.5 per cent.

Fed policy makers are scheduled to meet four times before the end of the year and unless the economy shows clear signs of further slowing, they are expected to keep raising rates at each of those sessions. And the process will probably not end there.

Alan Greenspan, the Fed chairman, went out of his way last month to brush off weak growth in jobs and consumer spending as a “soft patch” that “should prove short-lived”.

Bank of England

The Bank of England on Thursday raised interest rates by a quarter-point for the fifth time since November to cool a roaring British economy, and economists said another hike is just a matter of time.

The central bank said the move to 4.75 per cent, the highest in almost three years, was needed to keep inflationary pressures in check as the economy is still expanding briskly and the housing market remains strong.