Today and tomorrow in the center of market’s attention there will be June FOMC meeting which consists of all members of FRS Board of Governors and also president of federal reserve banks of several districts.
The majority of exchange analysts forecast that this time FRS representatives will leave rates of federal funds at a former level, at a level of 5,25 % per annum. That, marking a year since that day when the rate has been set at this level, we remind that since June, 2006 the federal committee kept the rate at a level of 5,25 % eight times in a row.
Crisis in the market of the real estate, which led to slump in production in building branch, put a serious question. Representatives of industry consider that more radical measures are necessary for overcoming crisis in the market of the real estate and stimulation of production, drop in rates would affect positively a condition of economy.
However FRS is not going now to do sharp movements. On results of the first quarter of current year the US economy is being restored and gradually returns to steady growth. FRS considers that growth of production is stable and the situation in the labor market does not cause alarm. On the other hand the problem of the increased inflation creates the certain risks for economy that does not enable ??? to lower a level of rates.
The full retail price index showed growth of inflationary indicator by 0,7 points in May, but basic price index increased only by 0,1 point.
However an annual level inflation makes 2,2 % per annum. In spite of the fact that it is the lowest level since March, 2006, nevertheless FRS considers that the inflationary indicator should be not above a target level of 2 % per annum for normal development of economy.
Indicators of the US economy, which will be taken into consideration by Committee members, are as follows:
The preliminary parameter of GDP gain in 1 quarter of current year showed the lowest value at 0,6 %. However, as it is predicted final value will demonstrate tomorrow growth by 0,8 %.
The ISM index in production in May showed rise up to 55 points in May from 54,7 in April, and the services index was up to 59,7 points from 56,0 in April.
On the market of the real estate existing home sales fell by 0,3 %, to the lowest level for last 4 years. Yesterday's data on new home sales demonstrated decrease in activity by 1,6 % in May in comparison with April.
The sales volume in retail trade of the USA for first three weeks of June dipped by 1,0 % according to the report of Redbook Research. Johnson Redbook Index also showed that adjusted for seasonal variations sales volume for first three weeks of June grew by 1,7 % in comparison with June, 2006.
Without taking into account seasonal variations the volume of retails for a week June, 17-23 was up 1,4 % in comparison with the same period of the last year whereas week before its growth made 2,0 %. Growth of sales within the third week of June was slowed down and was less than it was expected.
The companies of retail trade gave various explanations to this delay. Some of then specified that delay of sales is caused by weather. Other companies noted that sales of men’s clothes were above a year ago due to Father’s Day", - it is said in the report.
As a whole in the market the condition of balance is kept, before FOMC decision on rates and on a background of absence of especially significant news investors close long-term positions. While we remain outside the market.
