
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, March 15, 1994                   TAG: 9403150189
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

PRESIDENT: RATE RISE NOT NEEDED

There is no reason for interest rates to keep climbing, President Clinton said Monday. He said it's too early to say whether rising rates have hurt the economy, but ``we'll be all right'' if increases stop.

Economists interpreted Clinton's comments as a message to financial markets rather than to the Federal Reserve.

The Fed nudged a key short-term interest rate from 3 percent to 3.25 percent Feb. 4. Since then, long-term rates, which are set in financial markets, have climbed by more than twice as much.

Thirty-year mortgages, for instance, averaged 7.63 percent last week, up from 6.97 percent the week before the central bank acted, according to the Federal Home Loan Mortgage Corp.

At a reception in Detroit for delegates from the world's major industrialized countries, Clinton said rates ``were bound to go up some'' after the government reported that the economic growth rate hit 7.5 percent in the fourth quarter.

``We had the highest growth rate in a decade, but I think that since there's no inflation in the economy, the interest rates should not continue to go up,'' the president said.

``I don't think we can say ... for sure yet'' whether rising rates have hurt the economy, he said, adding, ``If they moderate, tail off a little, we'll be all right.''

The Mortgage Bankers Association of America has reported a sharp drop in mortgage refinancings, which had helped fuel economic growth by putting cash in homeowners' pockets.

Analysts said Clinton's remarks appeared to be directed at the long-term rates set by the market.

``That's a carefully worded statement. He's really talking about long-term rates, not attempting to interfere with the Fed's independence,'' said economist David Jones of Aubrey G. Lanston & Co. in New York.

Jones said he agreed that long-term rates were probably higher than required by fundamental economic conditions. He said one factor driving rates is traders' fear that the Whitewater controversy will limit Clinton's effectiveness. He predicted rates would edge down as soon as Whitewater fades.

Economist Robert Dederick of the Northern Trust Co. in Chicago also agreed long-term rates might retreat a bit, but said they would soon rise again.

``My view is the trend is higher, but they've moved up too fast, too soon,'' he said. ``There's no reason to think rates won't be trending higher.''

by CNB