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Breaking News

Durable Goods Orders Rise 2.9 Percent

Aired June 26, 2001 - 08:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: Well, any second now, we're waiting for some key economic figures on durable goods to come out and let us know how the economy is doing here in the United States. Also, the Fed begins a two-day meeting and, of course, everyone is wondering whether interest rates will be cut for a sixth time this year.

Tim O'Brien of CNN Financial News is in Washington with more on these figures, durable goods as well other economic figures. Good morning, Tim.

TIM O'BRIEN, CNN CORRESPONDENT: Good morning, Carol. We don't have the durable figures numbers yet, and there is a great deal of speculation about the rate cut. Everybody seems to think it's either going to be a quarter point or a half a point, but which will it be? I certainly don't know.

I did raise that question with three economist yesterday, all Fed watchers. Two said half a point, one said a quarter point but interestingly, all three said if it were up to them, if they were on the Fed, they wouldn't cut rates at all, that it could be inflationary.

It is true the five previous cuts do not appear to have had much effect, but they point out there is a lag time. It usually does take about six months for the effect to be felt. So, it could be happening now anyway. And another point that they make...

LIN: Tim, we -- I'm sorry to interrupt you. We just got those durable goods figures in. Orders are up 2.9 percent. These are things like steel and cars and electronics. And I'm wondering if the Fed is going to be looking at these figures and be more concerned about inflation because it looks like factories are still ordering many of these durable goods to keep the economy going?

O'BRIEN: That is a good sign. I think they will take that into consideration. But they're also going to be taking into consideration the earnings reports which continue to be not so good. There's a real problem trying to balance between recession and inflation. Whatever they do, we can rest assured that we're going to get that customary advisory that they're weighing the risk of inflation against the weakening economy and right now, the weakening economy is the greater concern, they're going to keep their hand on the throttle.

LIN: I'm wondering if you have any idea why these other sets of interest rates, these 30-year fixed mortgage rates, don't seem to be budging?

O'BRIEN: Well, they're already at -- not an all-time low, but they're way down. The mortgage rates are not affected by the rate cut here as much as consumer loans and credit card loans. Indirectly affected, but not correctly affected.

LIN: All right, what are expecting, anticipating for the consumer confidence figure that comes out later this morning?

O'BRIEN: Well, you know, they will pay great attention to that. Consumer confidence is up. That helps, but sometimes consumer confidence is misplaced and the Fed is going to be more concerned not with what consumer say but with what they do. Are they spending again?

Now, just yesterday there were statistics showing that existing home sales were up. That's a good sign. On the other hand, there's also a dark side showing that the prices were up. So, that will fuel concerns about inflation. It's fine tuning, and where do they draw the line.

LIN: All right, we will find out tomorrow. Thank you very much Tim O'Brien, reporting in from Washington.

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