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COPYRIGHT 2006 Voxant, Inc.
Original Source: NIGHTLY BUSINESS REPORT
PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: It was off to the races big time on Wall Street this afternoon. Stocks take off right after the Federal Reserve takes up interest rates by a quarter of a percent. The Dow gains 217 points, its best single-day showing in three years. The NASDAQ Composite soars 62.
SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: We`ll scrutinize the Fed`s decision and its accompanying statement with two experts who say the campaign of raising interest rates is not over yet. They`ll tell us why and what to expect.
KANGAS: This man runs the airline that a new survey named the best of the traditional network carriers. You`ll hear from Larry Kellner, chairman and CEO of Continental with an update on the airline and the industry.
GHARIB: And investors beef up the stock price of McDonalds on hopes of higher sales and margins, especially in Europe.
KANGAS: I`m Paul Kangas.
GHARIB: And I`m Susie Gharib. This is NIGHTLY BUSINESS REPORT for Thursday, June 29.
Good evening, everyone. The Federal Reserve raised interest rates once again today and stocks on Wall Street reacted with one of the biggest rallies of the year. The Dow surged 217 points, a gain of almost 2 percent, and the NASDAQ jumped 62 points or about 3 percent. Even though the Fed increased rates by a quarter percent marking its 17th consecutive hike, investors are still speculating today`s move could be the last for a while. Erika Miller reports.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The stock market cheered today`s comments by the Federal Reserve, because investors believe a rate hike in August is less likely. In the statement that accompanied the rate decision, policymakers altered language to suggest a pause might be possible if inflation pressures moderate. Investors were especially encouraged by the tone of the statement.
LARRY KANTOR, CHIEF ECONOMISTS, BARCLAYS CAPITAL: This statement could have been tougher. It could have been more hawkish. It could have signaled much more concern about inflation and therefore, a more definite stance about an August move.
MILLER: But many economists think the stock market got it wrong and the Fed will likely hike rates in August. The reason? Inflation still remains a serious threat.
STEVEN RICCHIUTO, CHIEF US ECONOMIST, ABN AMRO: They seem to believe that if the economy slows, inflation will dissipate. The problem is, how much of a growth slowdown do we need or how slow does the economy have to become in order to get inflation to dissipate. That`s not addressed at all.
MILLER: The Fed statement overshadowed the central bank`s decision to lift short-term interest rates by a quarter of a percentage point. The Federal funds rate -- the rate banks charge each other for overnight loans -- now stands at 5.25 percent, the highest level in more than five years. It was the 17th straight quarter point increase since the Fed began raising rates in June 2004. Economists say whether the Fed continues raising rates depends on economic data, particularly reports on retail inflation and the labor market. Most economists are betting there will be only one or two more rate hikes this year. But some economists think there could be at least three more, putting the Federal funds target at 6 percent by year end.
KANTOR: We think that growth will be maintained at over 3 percent instead of slowing, which is what the Fed seems to think is going to happen. And if it`s maintained above 3 percent, we think that inflation pressures are going to continue to increase and be above the Fed`s comfort zone.
MILLER: The markets will be looking for more clues about the direction of interest rates July 19 and 20. That`s when Ben Bernanke will present his semi-annual outlook for monetary policy to Congress. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
KANGAS: Stock prices weren`t the only things heading higher today. Oil prices rose sharply as well. Light sweet...
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