Housing Starts Grow, Raising Inflation Fears: Economists See Another Interest Rate Increase
Housing starts surged by 4.4 percent last month, offering evidence that consumer confidence is taking hold and triggering a new bout of inflation fears on Wall Street.</br></br>Stock and bond prices tumbled on yesterdayÛªs Commerce Department report, which surpassed many economistsÛª expectations, as investors concluded the economy is overheating. The yield on the benchmark 30Vi-year Treasury bond, which goes up when prices go down, hit 7.996 percent, its highest level in more than two years.</br></br>Analysts said the Federal Reserve is all ,but certain to raise short-term interest rates again next month in an effort to slow the economy's growth.</br></br>Û÷There must have been a lot of raised eyebrows at the Fed this morning," said David Lereah, chief economist at the Mortgage Bankers Association, who predicted the central bank's top policy makers would raise short-term interest rates by at least a halfpercentage point when they next meet on Nov. 15.</br></br>ÛÏThe housing sector is the most interest-sensitive sector of the economy, but so far it See HOUSING, BS.CoL 4 hasnÛªt been affected by higher rates," he said. ÛÏI think this will force the Fed to regroup and raise rates again.Û