Regan: Rates to Fall Through End of '82 If Spending Is Cut: Regan Sees Interest Rates Dropping
Regan predicted yesterday that interest rates will fall through the end of this year if federal spending is reduced and said that the Federal Reserve does not need to ease monetary policy to ensure an economic recovery.</br></br>ÛÏI think that interest rates will come down as it is perceived that these [budget] deficits are down and will stay down,Û Regan said in an interview.</br></br>He disputed the forecast of some analysts that interest rates will turn up again later this year when the expected recovery boosts business loan demand again at the same time the TreasuryÛªs own borrowing needs are rising sharply.</br></br>Rates will fall ÛÏnot sharply, not plummeting in a straight line, but coming down over the period between now and the end of the year,Û</br></br>Regan said. The Treasury secretary does not anticipate a significant rise in business loan demand as a result of the recovery. To the contrary, he said, rising sales will improve companiesÛª cash positions in the third and fourth quarters, enabling them to cut back on their short-term bank borrowings.