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COPYRIGHT 2005 FDCH e-media
Original Source: NIGHTLY BUSINESS REPORT
SUSIE GHARIB, NBR ANCHOR: A lot of interest on Wall Street today -- interest in interest rates, that is. Blue chip stocks end the day lower, off 64 points, as interest-rate-sensitive stocks fall ahead of a likely boost in rates by the Fed tomorrow.
PAUL KANGAS, NBR ANCHOR: If you Ask Jeeves today, he`ll tell you his stock went up a whopping 17 percent. That`s because the Internet search engine is getting a new owner. You can just ask Barry.
GHARIB: Hundreds of thousands of Americans have had their credit compromised in recent weeks, victims of identity theft, due to problems at some of the biggest names in the credit business. Now those same businesses are selling credit protection.
KANGAS: And we`re talking taxes tonight. A look at three big mistakes taxpayers make when filing their federal returns and how you can easily avoid all three of them.
GHARIB: I`m Susie Gharib.
KANGAS: And I`m Paul Kangas. This is "Nightly Business Report" for Monday, March 21.
(COMMERCIAL BREAK)
KANGAS: Good evening, everyone. Another dreary day on Wall Street as investors were cautious ahead of tomorrow`s Fed meeting. The Dow lost 64 points, and the Nasdaq was about unchanged. Federal Reserve policymakers meet tomorrow in Washington and are expected to raise interest rates, the seventh time since last June. But as Scott Gurvey reports, there are other reasons why investors are jittery.
SCOTT GURVEY, NBR CORRESPONDENT: Fed watchers are virtually unanimous in their belief that the Central Bank will raise the Fed funds rate 25 basis points to 2.75 percent when it meets tomorrow. So they are speculating on possible changes in the statement the policymakers will release. At each of the last six meetings, the Fed has said the pace of rate changes are, quote, "likely to be measured." Now some economists say growth is accelerating and the Fed should raise rates faster, while others worry rising energy and other commodity prices will cause an economic slowdown. They want the Fed to keep rates low.
DREW MATUS, LEHMAN BROTHERS: I think the key point everyone is watching for is the measured pace language. And I think that you`re going to see that in the language, largely because they really don`t have a choice. If they remove the measured pace language, it`s going to tell half the market that they`re going to accelerate rate hikes, and it`s going to tell the other half that they`re going to pause.
GURVEY: With that uncertainty, the Fed and the markets are closely watching for any signs of inflation. Tomorrow and Wednesday will bring key reports on inflation at the producer and consumer levels. The so-called core inflation rates are expected to remain low.
Bond traders have to anticipate both inflation rates and Fed moves to make a profit. Their trading predicts steady rate increases at least through the Fed`s August meeting. Then the rate will be 3.75 in what most see as the neutral range.
ELISABETH DENISON, DRESDNER, KLEINWORT, WASSERSTEIN: Whether 3.5 or 3.25 percent or 3.75 is the neutral level is not something they can decide right now, and probably won`t be able to decide until we are there, because it will depend on economic conditions at that time. If the economy is on the verge of slowing, it might be too high, and if the economy is actually picking up pace or if inflation is rising, it might be too low.
GURVEY: With no change expected in the measured pace language, Fed watchers suggest we pay close attention tomorrow in the so-called risk clause. The Fed has been saying the upside and downside risks to the economy over the next few quarters are roughly equal.
Scott Gurvey, Nightly Business Report, New York.
GHARIB: A major merger in the medical industry today. Medicis Pharmaceutical is buying...
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