MercoPress. South Atlantic News Agency

Higher interest rates anticipated in Wall Street

An overwhelming majority of Wall Street economists and analysts believe the United States Federal Reserve will again raise interest rates in the next meeting scheduled for early August.

The poll was taken among primary bond operators following the Fed' Thursday's 25 points increase to 3,25%, the ninth consecutive increase in the last twelve months. They all coincided that the Fed release was unequivocal in so far as continuing with raising rates, "the stance of monetary policy remains accommodative" and will respond to changes in economic prospects "as needed to fulfill its obligation to maintain price stability".

Furthermore, most agreed that next August 9 the Fed Open Market Committee will decide another 25 points increase to 3,5%, with only a few forecasting a pause before retaking the tendency.

Another 25 points increase is anticipated for September, with the objective of reaching the end of 2005 with a basic rate of 4%. Since June 2004, the Fed has risen the basic rate 225 points to 3,25%.

Federal Reserve chairman Alan Greenspan is scheduled to testimony before the Financial Services Committee of the House of Representatives next July 20 when he will semi annual report on the US economy.

Mr. Greenspan will also visit the Banking Committee of the Senate, but no date has yet been announced.

However, fund administrators have again returned to shares since long term bond yields remain particularly low. A poll among ten fund managers showed that in June 67% of investments went to shares, up from 54% in May, while bonds exposure dropped to 25,5% from 37,5% in May.

Apparently long term bond yields, 10 year Treasury bonds, are at 3,95%, almost a full point below a year ago.

Funds investments seem to prefer energy related shares, given the surging prices of oil, and don't seem attracted with finance related papers.