Interest Rates Seen on Downswing
system from the rest of the world, monetary policy can now be directed toward easing the money markets.Û</br></br>system from the rest of the world, monetary policy can now be directed toward easing the money markets.Û possibly bottoming out at about 5 per cent before upward pressures come into play in mid-1972, according to James J. OÛªLeary, vice chairman and economist of the United States Trust Company of New York.</br></br>Writing in the current issue of the newsletter distributed by MGIC Investment Corp. whose subsidiaries are suppliers of financial guarantees related to the real estate industry, OÛªLeary contended that the underlying reason for the downward trend has been the sluggishness in business activity and continuing slack in the loan demand.</br></br>"The more obvious reason, however, is the new economic program of the Nixon administration. a program which came into being primarily because of the unsatisfactory rate of business recovery,Û OÛªLeary wrote. ÛÏWith the adoption of new tools for controlling inflation, and at least temporary insulation of our monetary</br></br>Heavy purchase of shortterm U.S. government securities by foreign central banks has also been a major factor in this decline, OÛªLeary added. Other factors include the adoption of the floating prime rate tied to the commercial paper rate, some ÛÏjaw boningÛ by government officials and perhaps a desire to avoid any addition of interest rate controls to those in effect for prices and wages.