Monitor

All the News of the World US response to the Federal Reserve raising interest rates one quarter of a point

MODEST INTEREST rate hikes are a way to discourage excessive borrowing, easing price pressures. This is demonstrated by the rise in mortgage rates and the drop in housing starts. Labor leaders and their supporters in Congress don't like the rate hike. They complain that it undercuts consumers' living standards. But history shows the Fed can't afford to delay action until inflation takes root. A vigilant Fed and steady prices have provided the underpinning for unprecedented job and economic growth in the 1990s. In short, reality doesn't have to bite, if the Fed keeps inflation at bay.

USA Today

EVEN WITH rates rising, consumer confidence has climbed to a 30-year high. That suggests that neither the economy nor spending is likely to slow soon. If the US economy continues to grow at the recent rate, there are substantial risks that inflation will accelerate and that, with the record trade deficit continuing to expand, the dollar will eventually come under heavy pressure. Those risks will be intensified if the White House and Congress choose to ease fiscal policy now, either through large new spending programs or by a big tax decrease. Should that happen, Greenspan [Fed chairman] may have no choice but to push interest rates up again later this year.

The New York Times

THE NATION finds the economy-slowing move oddly reassuring. The Fed said it is now neutral on what the economy might next require. This neutrality acknowledges that economists can't be sure why the economy is so healthy. Remember, the Fed predicted the economy would grow slower than it has. It expected inflation to appear, but it hasn't. It remains worried that money is too easy to get and people are spending too freely, and the demands of consumers are too far ahead of gains in productivity. In such an environment banking experts are right to admit they can't predict what the Fall will bring, so they stand alert to all threats to the economy. That is all that American workers, consumers and investors can expect.

Tampa Tribune