Show INTEREST RATES Easing of term short money costs has given rise to the hope that we may already be embarked on a cycle of im im- im improving proving business activity This expectation tion has recently been strengthened by bythe bythe the decision of a well known monetary analyst to change his position on the probable course of interest rates This expert had been Insisting that money costs would not dip much below the early 1982 highs Now he thinks that they are heading down and will be seek seek- seeking seeking ing lower ground right Into next year His view however is not as yet shared by many economists Indeed some forecasters who had hac predicted earlier that money rates would drop sp substantially this summer are now hedging They doubt much further easing easing ing before the next move to the upside And a few look for the prime lending rate to be back at 16 10 percent or thereabouts soon after Labor Day even though they do concede that Inflations Inflation's fires have been dampened substantially WHAT WE EXPECT After a study of pertinent data and of other economic Information the Research Department of Babson's Reports is mildly optimistic about in in- in interest terest rates We believe that a good goodcase goodcase case can be made for further easing In short term short term money costs and that some term 1 rates will ensue The fhe strong credit needs of the first half of this year have lessened and pro pro- promise mise to be even more relaxed in the weeks immediately ahead The business upturn now slowly taking form will not become strong enough to nudge money rates toward higher levels again until we are deep into inlo autumn This short short run run position on interest rates Is buttressed by our lion tion of conditions currently prevailing in money moncy markets paper rates are encouragingly well below the burdensomely high sates rales obtaining at this Ibis time last yeas And for lor the must part this is Irue true of the federal funds rate mh growth is also lagging y ago t-arago levels Ink hile at recent reading list list- lending rule itself was SWill same six percentage betow the hel ty O percent that Ihal during the tale late of 1981 i SHAPING THE TREND The dip In money rates raIls has occurred over lr the he past several weeks has been I the hl natural result at 01 these factors factor's I 1 Ill he abrupt and sharp boast in the index hi k- k king ing the lilt safe to is a hair hail 0 or to of In tunes con percent powerful nationwide con nce to markups of 01 privet al Ihl I a retail level lId and the restraining ning al 0 still rising costs on corporate P as a- ill as un on the Ihl disposable li in curie of lasses of consumers Is I's Another wr 1 a 11 01 tam the Ilic la hs money Ia rates Its It's that thaI many had hild hoped would ankh t r ill in IIII 1982 than Ihan has ac all the 1 case l I-l was the slow pall at 01 till o overall economic l 1 his led hd too to a lua Ius ther art n nn ching cutback ill in business outlays outlay's tor plant plaid and equipment TilE PROSPECTS It has been a long time coming but the Ihl business and production downslide has finally finall tapered of all I The contraction of till the economy has now carr carried d far farenough enough enough- and cut cuI deep delp enough lo enough 10 allow or even encourage a larger reduction in term short money rates than that seen so far Partly as a result of reductions in its discount rates the Ithe fee levied on loans to member banks th the Federal Reserve has opened the path toward interest rates Member banks have followed suit by reducing their prime lending rates rales Perhaps the Feds will cut its discount rate again Even If it does not we think you will see a further reduction in the prime and additional weakness in money rates rales as a whole But it could be firming flrming a bIt again beginning sometime between Halloween and Thanksgiving Thanksgiving More Power According to Depart Depart- Department ment ment of Energy statistics Americans use 30 times more energy now than they did years ago At this rate a baby born to to- to today day will use 21 tons of coal 2300 barrels of oil and 64 million cubic feet of natural gas during his lifetime |