Markets Await Fed’s Word on Interest Rates

Jun 17, 2013 8:04am

Morning Business Memo…

Federal Reserve Board Chairman Ben Bernanke is likely to send financial markets soothing words about interest rates and cheap money. US stock futures and overseas markets rose this morning as hopes grew that the Fed will put off plans to wind down its stimulus program. Bernanke will face reporters on Wednesday after a Federal Reserve two-day policy meeting.

“The Fed has worked very hard to get stock prices and home prices rising to help the economy, and I don’t think they want to back away from that in any way,” says Mark Zandi, chief economist at Moody’s Analytics.

“There is nothing in the underlying economy that would suggest the Fed needs to change policy any time soon,” says Brian Bethune, economics professor at Gordon College in Massachusetts. That said, global financial markets have been down three out of the past four weeks. Volatility spiked after Bernanke told Congress that the central bank might soon scale back its effort to keep long-term interest rates at record low levels.

The big rivalry between European plane maker Airbus and Boeing will be played out this week at the Paris Air Show. Airbus says aircraft leasing company IFLC has made a firm order for 50 single-aisle A320neo jets. The A320neo, a more fuel-efficient model than the original and widely used A320, was the star of the last Paris Air Show. This year Airbus is hoping to attract attention to its new wide-body A350 aircraft. The race for the title of biggest plane maker is as tight as ever. Over the whole of 2012, Airbus delivered 588 planes. That was a record, but one Boeing beat with 601 deliveries, the first time since 2003 it came out on top.

Three new economic reports on housing will be released this week. They may show signs of further improvement. The National Association of Homebuilders housing market report comes out this morning. Housing starts for May will be released on Tuesday and the existing home sales survey will be published on Thursday.

General Motors is recalling nearly 200,000 mid-size SUVs because of a potential fire risk. The problem is serious enough for GM to urge owners to park their trucks outdoors until the repair is made. According to documents posted by the National Highway Traffic Safety Administration the master power door and window module in the driver’s door on some SUVs can short out and catch fire. USA Today Reports that “the recall expands — after talks with the NHTSA — a GM recall last August of 249,260 of the same trucks, but only those sold or registered in 20 Snow Belt states where salt is used on the roads.” The recall covers 2006 and 2007 Chevrolet Trailblazer, GMC Envoy, Buick Rainier and other SUVs made by General Motors.

Richard Davies Business Correspondent ABC News Radio ABCNews.com Twitter: daviesabc

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