Bond Prices Drop as Dollar's Decline Prompts Concern About Fed's Intentions
NEW YORK -- Bond prices declined yesterday amid concern that the dollar's sharp decline in foreign exchange trading may keep the Federal Reserve System from easing credit conditions further.</br></br>Until recently, many analysts were predicting that the Fed soon would push interest rates lower in an attempt to stimulate economic activity. Now some contend the Fed will wait, hoping the dollar's drop will revive the nation's beleaguered manufacturing industries by making exports cheaper and imports more expensive.</br></br>The Fed's policy-making arm, known as the Federal Open Market Committee, yesterday concluded a two-day meeting to establish credit strategy for the weeks ahead. Also on the committee's agenda was a review of the Fed's money supply targets for this year and the setting of new ones for 1986.</br></br>Fed officials declined to comment on what actions the committee took. But some details of the meeting are to be disclosed next Wednesday, when Paul Volcker, Reserve Board chairman, is scheduled to testify at a congressional hearing.</br></br>Prices of some actively traded U.S. government bonds fell yesterday by about 1/2 point, or approximately $5 for each $1,000 face amount. Most short-term interest rates edged higher.