Virgil
08-04-2008, 06:27 AM
http://www.bloomberg.com/apps/news?pid=20601087&sid=ado8GLitIFNw&refer=home
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By [bn:PRSN=1] Bob Willis [] and [bn:PRSN=1] Shobhana Chandra []
Aug. 4 (Bloomberg) -- The biggest increase in prices in almost three decades eroded consumers' buying power in June, diminishing the boost from the government's tax rebates.
Consumer inflation climbed 0.8 percent, the most since February 1981, the Commerce Department said today in Washington. Spending increased 0.6 percent after a 0.8 percent gain in May.
The tax rebates from the government's stimulus plan will provide only a temporary boost for Americans in the face of $4- a-gallon gasoline, tumbling home prices and mounting job losses. The Federal Reserve is projected to hold interest rates unchanged tomorrow as the risks of both faster inflation and slower growth mount.
``There is a bit more inflation pressure than many people anticipated,'' said Kevin Logan, a senior market economist at Dresdner Kleinwort in New York, who correctly forecast the gain in spending. ``Inflation pressure is more widespread and that has to be some concern for the Fed. The tax cuts have helped maintain spending, but it's likely to drop off pretty dramatically in the fourth quarter.''
Treasuries fell, pushing yields higher. The benchmark 10- year note yielded 3.97 percent as of 8:57 a.m. in New York, up 3 basis points.
Economists had forecast spending would rise 0.4 percent, after an originally reported 0.8 percent increase in May, according to the median of 67 estimates in a Bloomberg News survey. Projections ranged from a 0.5 percent decline to a 0.9 percent gain.
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By [bn:PRSN=1] Bob Willis [] and [bn:PRSN=1] Shobhana Chandra []
Aug. 4 (Bloomberg) -- The biggest increase in prices in almost three decades eroded consumers' buying power in June, diminishing the boost from the government's tax rebates.
Consumer inflation climbed 0.8 percent, the most since February 1981, the Commerce Department said today in Washington. Spending increased 0.6 percent after a 0.8 percent gain in May.
The tax rebates from the government's stimulus plan will provide only a temporary boost for Americans in the face of $4- a-gallon gasoline, tumbling home prices and mounting job losses. The Federal Reserve is projected to hold interest rates unchanged tomorrow as the risks of both faster inflation and slower growth mount.
``There is a bit more inflation pressure than many people anticipated,'' said Kevin Logan, a senior market economist at Dresdner Kleinwort in New York, who correctly forecast the gain in spending. ``Inflation pressure is more widespread and that has to be some concern for the Fed. The tax cuts have helped maintain spending, but it's likely to drop off pretty dramatically in the fourth quarter.''
Treasuries fell, pushing yields higher. The benchmark 10- year note yielded 3.97 percent as of 8:57 a.m. in New York, up 3 basis points.
Economists had forecast spending would rise 0.4 percent, after an originally reported 0.8 percent increase in May, according to the median of 67 estimates in a Bloomberg News survey. Projections ranged from a 0.5 percent decline to a 0.9 percent gain.
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