CPI, Greenspan to Offer Clues on Rates
A consumer price report and Federal Reserve Chairman Alan Greenspan himself will provide more clues this week as to whether the Fed will raise interest rates later this month. Greenspan on Thursday will address the congressional Joint Economic Committee on the nation’s economic outlook. Though the Fed chairman is rarely explicit when he discusses future Fed policy decisions, his words should pretty well nail down opinions on the Fed’s action at its meeting June 29 and June 30. By the time Greenspan speaks, the Labor Department will have released the consumer price index for May. The index, to be issued Wednesday, tracks the cost of goods and services. Analysts expect that it rose 0.2% in May following April’s surprising 0.7% surge. April’s CPI increase was the largest in nine years and was spread across most industries. The core rate of the CPI, which excludes food and energy, also probably rose 0.2% in May, analysts said. Even a 0.2% increase in the May CPI would suggest there’s at least strong possibility that the Fed will raise rates to try to cool the economy and contain inflation.
Other economic reports due out this week are likely to point to robust consumer demand.
* Today, a Commerce Department report is likely to show that business inventories piled up in response to strong consumer spending, rising 0.2% in April following a 0.5% increase in March, analysts said.
* On Wednesday, the Commerce Department will release its May report on new housing starts, which probably increased 3.6% last month to 1.63 million at a seasonally adjusted annual rate.
* Also Wednesday, the Fed is expected to report that industrial production increased 0.3% in May following a 0.6% gain in April, and a separate Fed summary on regional economic activity--the beige book--is expected to point to more worker shortages that are keeping pressure on labor costs.
* On Thursday, a pair of Commerce Department reports--the monthly balance of trade for April and the first-quarter current account--are expected to show continued strong consumer demand for imports.
