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White House Predicts Fall in Interest Rates

October 15, 1987|Associated Press

WASHINGTON — The White House, seeking to calm jittery financial markets, today called interest rates "significantly higher" than can be justified by "current or existing inflation" and predicted they will fall in the months to come.

"Financial markets are quite volatile, and although we did not welcome yesterday's developments, our basic positive views toward the economy remain intact," the White House said in a statement read by spokeswoman Leslye Arsht.

The statement was in response to Wednesday's turmoil in financial markets as stock and bond prices and the dollar all plunged after the release of a weaker-than-anticipated report on the U.S. trade deficit.

In credit markets, a key interest rate--the yield for 30-year Treasury securities--soared past 10% for the first time since 1985.

"We believe interest rates are significantly higher than can be justified by current or expected inflation and that they are likely to move down in the months ahead," the statement said.

"The unparalleled business expansion in the private sector was positively influenced by President Reagan's consistent policies of deregulation, limited government, lower inflation and improved tax incentives," it added.

"Those policies will continue to positively affect the economy in future months."

Although trade figures released on Wednesday by the Commerce Department showed that the U.S. trade deficit had declined in August to $15.7 billion, down from the record $16.5 billion in July, the report jolted financial markets, where a larger improvement had been anticipated.

Administration officials have contended that the trade figures are misleading, and mask actual small improvements in U.S. trade volumes.

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