Greenspan Puzzled About Rates–Here’s Why
Atlanta Fed Governor Fred Guynn reiterated earlier comments to the effect that
the Fed had not reached a neutral policy stance. The announcement sent the stock
market down from its highs to close mixed. On Monday, Greenspan
said the economy would remain strong and hinted that the Fed would
stop raising rates, at least for the short term. He also said he is puzzled by
declining long-term rates in the face of steady tightening.
A Fed report said consumer borrowing in April grew at the
slowest pace in five months, and cited rising rates, making money more
expensive. Consumer credit rose $1.3 billion to $2.131 trillion in April.
Chris Rupkey of Bank of Tokyo-Mitsubishi said "This slowdown in consumer
fits the soft patch economy story hand-in-glove."
Ten year notes closed at a new contract high.
Crude oil fell on speculation that fuel supplies
are being boosted by higher refinery output. OPEC meets on June 15 to discuss Q3
oil production.
Australia cut its 2005-2006 wheat forecast
because of a serious drought.
German industrial production rose 1.1% in April,
the first gain in three months.