Newspaper article THE JOURNAL RECORD

Industrial Output Up for Fourteenth Consecutive Month

Newspaper article THE JOURNAL RECORD

Industrial Output Up for Fourteenth Consecutive Month

Article excerpt

WASHINGTON (AP) _ The 14th consecutive monthly increase in production at the nation's factories, mines and utilities offered Federal Reserve policy makers a last bit of evidence Monday to justify pushing interest rates higher.

"It gives the Fed . . . a little nudge" a day before Tuesday's policy meeting, said economist Laurence H. Meyer, a St. Louis consultant.

The Fed's industrial production index rose a modest 0.2 percent in July, following a robust 0.5 percent gain the month before. The gain was stronger than predicted and would have been twice as large if not for a decline in electricity generation from an unusually high level in June and a strike at heavy equipment manufacturer Caterpillar Inc.

Meyer and other analysts expect the central bank's policy-setting Federal Open Market Committee, which meets today, to see the report as adding to the justification for the fifth increase in short-term interest rates this year.

Between February and May, the committee raised the rate banks charge each other for overnight loans from 3 percent to 4.25 percent. It probably will increase the rate by at least a quarter of a percentage point, and perhaps by half a point, at the meeting today, analysts said.

"The Fed is determined to demonstrate its zeal as an inflation fighter," said economist Sandra Shaber of The WEFA Group in Bala Cynwyd, Pa.

She anticipated the rate increase even though inflation appears under control. Through July, consumer prices rose at a rate that, if continued, would match last year's 2.7 percent.

But the Fed, analysts said, is trying to keep the economy from overheating before inflation starts to accelerate. In so doing, it hopes to restrain the rise in long-term interest rates, such as mortgage rates, which are set in financial markets rather than by the Fed directly.

But Democrats in Congress are protesting the expected increase in short-term rates.

"I hope the Federal Reserve will not consider it appropriate to destroy employment opportunities and hold wages down, just when it looks as if . . . workers may begin to make some gains," House Budget Committee Chairman Martin Olav Sabo, D-Minn. …

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