Tags: Lehman | Economist | Predicts | Interest | Rate | Hike

Lehman Economist Predicts Interest Rate Hike

Thursday, 29 September 2005 12:00 AM

A senior economist at Lehman Brothers Holdings Inc. predicts interest rate hikes from the Federal Reserve sparked by surging energy prices in the wake of two major hurricanes.

In a Thursday interview with Bloomberg Television, economist Drew Matus said, "I think they should raise rates since there is a lot of inflationary pressure."

Matus said hurricanes Katrina and Rita, both of which slammed oil refineries along the U.S. Gulf coast, have caused a supply shock to energy markets. The best way to deal with the subsequent spike in demand, he says, is to continue raising interest rates.

Recent comments from various Federal Reserve members indicate a willingness to keep nudging interest rates higher. Matus noted that Fed Chairman Alan Greenspan avoided the chance to comment on interest rates in recent speeches this week, choosing instead to make guarded statements centered on an inflated U.S. housing market.

Matus noted that a long, cold winter may be in store for many U.S. consumers who, he suspects, are ill prepared for a leap in home heating bills. Unlike a consumer's ability to lessen automobile driving in response to higher gas prices, it's tougher to respond to increases in home heating costs.

"It's hard to heat your home less, it's hard to keep your family comfortable for less and you're not going to know it happened until after you get the first big bill," Matus said.

Throughout the TV segment, the economist remained calm with regard to growth forecasts in the wake of the hurricanes. Matus didn't rush to reduce Lehman's growth estimates for 2006 because, he said, he wasn't hearing first-hand from corporations that they were struggling in the aftermath of the storms.

Matus predicted the next major economic events would unfold on the basis of "what the Fed is hearing from their Rolodexes" when they release the Beige Book in late October. The report will provide evidence from each of the 12 regional districts, which will form the basis of November's Federal Reserve meeting.

It is suspected the Fed may raise interest rates by a quarter point at the November meeting.

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A senior economist at Lehman Brothers Holdings Inc. predicts interest rate hikes from the Federal Reserve sparked by surging energy prices in the wake of two major hurricanes. In a Thursday interview with Bloomberg Television, economist Drew Matus said, "I think they...
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Thursday, 29 September 2005 12:00 AM
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