Angell expects Fed to raise rates by half-point next week

September 22, 1994|By Bloomberg Business News

NEW YORK -- Bear, Stearns & Co. chief economist Wayne Angell said the Federal Reserve will probably raise interest rates by a half-point when its policy-making committee meets next week.

"We think there is a greater probability that the Federal Reserve will move the fed funds rate by 50 basis points at next week's meeting," Mr. Angell said.

Mr. Angell, who stepped down from his position as a Fed governor earlier this year to join Bear Stearns, accurately predicted the Fed would raise the fed funds rate by 50 basis points at the FOMC meeting on May 17.

The economist now believes that the Fed will raise the fed funds rate and the discount rate by a total of 1 point before the end of the year. The fed funds rate, the rate banks charge each other for overnight loans, is 4.75 percent. The discount rate, the rate the Fed charges to member banks, is 4 percent.

"This predictive move does not alter our belief that there will be another" 50-basis-point increase by the end of the year, he said. The Federal Open Market Committee meets on Tuesday in Washington.

If the Fed raises interest rates next week, it could have a calming effect on financial markets, Mr. Angell said.

"Equity markets after the meeting will be more vulnerable if the Fed doesn't move than if it does move," Mr. Angell said. "I believe that the equity and bond markets would be better off with a 100-basis-point move."

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