Newspaper article THE JOURNAL RECORD

Fed, Administration Try to Calm Jittery Markets

Newspaper article THE JOURNAL RECORD

Fed, Administration Try to Calm Jittery Markets

Article excerpt

WASHINGTON (AP) _ The Clinton administration and Federal Reserve Chairman Alan Greenspan tried Wednesday to calm jangled financial markets worried by a steep fall in the dollar. But the soothing words were not backed by any action.

The Fed did not raise interest rates for a fifth time this year and the United States did not mount any kind of coordinated rescue effort as it did last month.

Even with jawboning the only policy tool being used, the dollar did rebound from the lows of the previous day when it had fallen below 100 Japanese yen for the first time since World War II.

Wall Street, which had been roiled by the free fall of the dollar, steadied as well with both stocks and bonds staging rallies.

Private economists interpreted the lack of action on the part of the central bank and the administration as an effort to hold their fire until the efforts would have maximum impact.

For one thing, economists said, it would be considered a major policy failure if the dollar continued to fall even in the face of interest rate increases in the United States and coordinated efforts by America's allies to intervene in currency markets by buying dollars.

But analysts said they still were looking for some coordinated intervention, along the lines of the 19-nation effort launched on May 4. They predicted that such a rescue effort was still likely within the week.

Treasury Secretary Lloyd Bentsen seemed to be promising as much, saying in a statement that he was concerned about the market turmoil and had been in close communication with the other members of the Group of Seven _ the world's seven richest industrial nations.

"We continue to be prepared to act as appropriate," Bentsen said in a statement that stressed that there was no reason for the dollar to be under such downward pressure because the underlying economic fundamentals were extremely strong.

That theme was also stressed by Greenspan and President Clinton.

At the White House, Clinton told reporters that the dollar was traded "in big international markets with other currencies, and they go up and down. But the fundamental economic realities in this country are very strong. …

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