Fed must raise rates to keep the lid on inflation

Article Abstract:

World financial markets believe that the Federal Open Market Committee will not make any changes to interest rates at its forthcoming meeting. However, there is considerable pressure on this body to take action, and it is becoming increasingly likely that there will be a tightening of monetary policy before the end of 1996. Many observers point out that the economy is already operating at above its normal level of capacity and that it is also expanding at more than its trend rate.

United States economic conditions

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Despite the Budget dodges, base rates must rise

Article Abstract:

UK chancellor Kenneth Clarke was under great pressure to reduce income tax in his recent 1996 Budget, and had to build the rest of the Budget around this measure. This meant that a great deal of creative accounting had to be done to ensure that the PSBR could also be presented in a credible way. There is no spare capacity at all in the economy, and this makes it very likely that base interest rates will have to be increased in the near future.

Budget, Budgeting, Budgets

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The inflation target that nobody wants to hit

Article Abstract:

Recent economic developments, including a rise of only 0.5% in GDP in the second quarter of 1995, seem to go against the view of the governor of the Bank of England that base rates should go up. It is likely that chancellor Kenneth Clarke will not allow a base rate rise at present or in the near future, but the governor may still continue to push for a rise. This will have the effect of reducing confidence in the economy.

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