Fed Survey Finds Economy Is Slowing --- Data Suggest Central Bank Will Hold Rates Steady At July Policy Meeting
Corrections & Amplifications</br></br>MORGAN GUARANTY TRUST Co. expects the Federal Reserve to raise short-term interest rates by an additional half percentage point this year and by a quarter point early next year. An article yesterday incorrectly said Morgan anticipates a quarter-point increase by the Fed this year and again in early 1998. (WSJ June 20, 1997)</br></br>WASHINGTON -- The Federal Reserve's latest survey of regional economic conditions found "pockets of weakness and evidence of capacity constraints restraining growth in some industries" in May and early June.</br></br>The widespread signs that economic growth has slowed in the second quarter while inflation has remained remarkably tranquil suggest that the Fed again will hold short-term interest rates steady when officials convene July 1 and 2.</br></br>"With weak retail sales and negative producer prices, the market now believes Chairman [Alan] Greenspan would need the nerves of a kamikaze pilot to raise rates in July," quips analyst Ralph Peters of Aeltus Investment Management in Hartford, Conn.