прогнозы/новости DJIA, S&P. Часть 12

Дмитрий Марков 7 июл 2008 в 23:35
Talk of $200 oil casts shadow over G8 summit

By Paolo Biondi and Gernot Heller

TOYAKO, Japan (Reuters) - Italy on Monday proposed increasing margin requirements on futures markets to deter speculative buying of oil, which Prime Minister Silvio Berlusconi said could reach $200 a barrel.

Oil retreated to around $143 a barrel on Monday, taking a pause from a record-breaking rally that lifted prices to a record $145.85 last week, up almost 50 percent this year.

Most analysts attribute the spike to supply shortages, increased demand and a weaker dollar, the currency in which most oil is traded, but Berlusconi said speculative bets on the futures market were also a factor.

"There are fears oil prices could increase further. Some people fear they could reach $200," Berlusconi told reporters on the sidelines of the annual summit of the Group of Eight rich nations on the northern Japanese island of Hokkaido.

An analyst with investment bank Goldman Sachs, Arjun Murti, raised eyebrows in May by forecasting that oil could reach $200 a barrel within two years.

Berlusconi said Italy favored a rise in margin requirements to curb speculative buying.

"This is our proposal and we have started talking about it in bilateral meetings. Stock exchanges should increase margin deposits on the futures market, which now stand at 5 percent. Someone said they should be increased to 50 percent but it's still small talk at this stage," Berlusconi said.

The relentless rise in oil prices cast a long shadow over the first day of the G8 summit, which brings together the United States, Japan, Germany, France, Britain, Canada and Russia as well as Italy.

"We have to look at different ways to fight high oil prices," German Chancellor Angela Merkel told a news conference.

"One question is what to do to act against speculation. The second question is, how do we arrive at a better forecast of oil demand developments and also how do we come up with a better forecast of oil production?"

The presidents of oil producers Nigeria and Algeria were among seven African leaders who joined the G8 for talks on Monday, and a senior Canadian official said they acknowledged the need to take account of the fallout from sky-high prices.

"The message was that they realize that there was a responsibility by oil-producing countries, including themselves, to consider the impacts of high oil prices on countries and the impact on development," the official told reporters.

Merkel said there was also a need to engage emerging economies that are consuming more and more oil.

China alone accounted for almost half of last year's increase in global demand.

"We will have to put the issue again on the agenda when we meet China, India, Mexico, Brazil and South Africa," Merkel said. That meeting will be on Wednesday, the last day of the summit.

Berlusconi's and Merkel's comments reflect growing pressures on politicians to do something about oil.

A British parliamentary committee will hold a hearing on regulation of the oil markets this month, while in the United States a raft of bills is before the House of Representatives trying to limit speculation in oil futures markets

Dutch bank ING said on Monday that it was not hard to imagine oil at $200 a barrel before the end of the year -- a level it said would crush demand and could trigger a price plunge in 2009.

"With the margin of spare capacity evidently wafer-thin, whether it is the surprising resilience of demand or some kind of supply disruption, ranging from a worse-than-usual hurricane season in the Gulf of Mexico or a potential Israeli attack on Iran, $200 is a target that no longer seems fanciful," ING economists said in a report.

(Reporting by Paolo Biondi, Gernot Heller and David Ljunggren; Writing by Alan Wheatley; Editing by Rodney Joyce)


Дмитрий Марков 7 июл 2008 в 23:37
Microsoft says willing to restart Yahoo talks

NEW YORK (Reuters) - Microsoft Corp on Monday said it would be willing to reopen talks to buy all or part of Yahoo Inc -- but only if a new Yahoo board is elected, a major boost for investor Carl Icahn's board slate.

Microsoft, which broke off talks in early May to buy the Internet company for $47.5 billion, said it would resume discussions immediately if a new board were elected at Yahoo's August 1 stockholder meeting.

The Microsoft statement came after Icahn, the billionaire financier who holds over 4 percent of Yahoo, issued his own statement that he had "spoken frequently" to Microsoft CEO Steve Ballmer over the last week. Previously, the two had not spoken.

Ballmer told Icahn that a big impediment to any Yahoo deal was his concern that the current board could "mismanage" the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.

In an interview, Icahn argued that his proposed dissident board slate would make Microsoft feel more secure in risking a large sum of capital to complete the deal during the regulatory approval process.

"You don't have to be Sherlock Holmes to realize there is no great comfort zone between the current Yahoo board and Microsoft," said Icahn. "During this waiting period for regulatory approval, any acquirer -- not just Microsoft -- would want a steward they would feel comfortable with."

In an open letter disclosed on Monday, Icahn said the Yahoo board was the major impediment to any Microsoft deal.

In response, Yahoo issued a statement saying it continues to be willing to reopen talks with Microsoft, but "we feel strongly" that any deal negotiated between Icahn and Microsoft "would not lead to an outcome that would be in the best interests of Yahoo stockholders."

Icahn also said he is actively interviewing replacements for Yahoo CEO Jerry Yang and its management team. "I am moving towards getting a potential new management team for Yahoo including a new CEO," he said in a phone interview.

The long-awaited signals that the Microsoft-Yahoo talks could be revived sent Yahoo stock up more than 10 percent in early trade on Monday.

Sanford C. Bernstein senior Internet analyst Jeffrey Lindsay said that if Microsoft is serious about resuming talks, "there is rationale for voting for the Icahn slate and essentially ousting the current Yahoo board and probably the management too."

"At the end of the day, you would have to expect that the big institutional shareholders would go for a deal with Microsoft," said Lindsay.

Yahoo stock at midday was trading up $2.55, or 11.9 percent, to $23.90 on Nasdaq. Microsoft shares were up 4 cents to $26.02.

Talks between Yahoo and Microsoft broke down in early May. Microsoft originally offered $31 per share and raised it to $33, but Yahoo demanded $37 per share.

After talks collapsed, Icahn amassed a stake in Yahoo and launched a proxy war to replace the Yahoo board and management, claiming they "botched" the Microsoft talks.

In his letter Icahn said: "Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo," including purchasing either its "search" function with large financial guarantees, or an outright purchase of Yahoo, said Icahn in the letter.

Microsoft said it would be premature to discuss details, such as the price it might offer for Yahoo.

Icahn said he would immediately move to replace Yang if his board slate were elected at the August meeting.

(With reporting by Robert MacMillan and Anupreeta Das)

(Reporting by Dane Hamilton; editing by John Wallace and Gunna Dickson)


Дмитрий Марков 7 июл 2008 в 23:39
Merrill may write down about $6 bln in Q2: Citigroup

(Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz) may write down about $6 billion in the second quarter primarily driven by losses on high-grade collateralized debt obligations (CDOs) positions and monoline exposure, said analyst Prashant Bhatia at Citigroup.

Bhatia, who now has the highest second-quarter writedown estimate for Merrill among brokers, also forecast a second quarter loss for the quarter and widened his 2008 loss per share view.

He said the writedown estimate for the second quarter comprised of $4.8 billion on super senior CDO long positions, offset by roughly $2 billion of gains on short positions with non-monoline counterparties and $2.2 billion on credit valuation adjustments related to financial guarantors.

"We estimate $500 million of marks on subprime whole loans, $300 million on private equity positions, and $200 million on debt revaluation," Bhatia said in his note dated July 6, which highlighted the second quarter preview for Merrill.

Bhatia also forecast a second quarter loss of $3.95 at Merrill, and widened his 2008 loss per share estimate to $6 from $1. He cut his price target on the stock to $65 from $75, while rating it a "buy."

Shares of Merrill rose 1.5 percent to $31.59 in morning trade on the New York Stock Exchange.

Bhatia said Merrill has raised $600 million more capital than it has lost since 2007 and that a sale of the company's stake in BlackRock Inc (BLK.N: Quote, Profile, Research, Stock Buzz) could generate more than $2.5 billion in capital.

Bhatia believes Merrill would most likely sell a portion of its stake in order to avoid raising capital and further diluting its investors.

Merrill, the world's largest brokerage, has a nearly 50 percent stake in money manager BlackRock. Merrill Lynch's stake in BlackRock currently has a market value of roughly $11 billion, Bhatia noted.

(Reporting by Ramya Dilip in Bangalore; Editing by Bernard Orr)


Дмитрий Марков 7 июл 2008 в 23:41
Rising oil threatens to damage emerging markets

LONDON (Reuters) - Most emerging economies beyond a handful of crude producers are suffering from record oil and food prices, with Asian markets in general and China's in particular likely to be notable losers.

South Africa and Turkey also stand out as being vulnerable, while Russia and the Gulf States, which should be the main beneficiaries as crude prices soar, will still struggle with high inflation and the risk of economic overheating.

Emerging markets have proved largely "decoupled" from the Western credit crunch but inflation is proving a global problem.

Until late May emerging equities in particular had been doing relatively well, more or less recovering losses earlier in the year when worries over Western banks sparked global risk aversion. Some investors even moved into emerging markets, seeking diversification from a developed world downturn.

"The credit crunch was very much a Western phenomenon," said Mark Hammond, investment director for fund manager Fidelity covering global, U.S. and emerging markets. "Inflation is much more global."

Hedge fund monitor EPFR says fund flows into emerging markets had been broadly positive this year but have now turned negative everywhere except the Middle East and Africa.

Index provider Standard & Poor's says that by their indices emerging equity markets lost 10.07 percent in June, putting them down 12.5 percent so far this year.

Developed markets were also hit, but S&P says they lost slightly less, down 7.90 percent in the year to date

Benchmark MSCI emerging equities are down almost 17 percent so far this year, against 14 percent for the equivalent global index

Emerging markets have in some ways been a victim of their own success. Their resilient and ever-growing demand for natural resources, particularly food and fuel in India and China, has prompting price rises that have in turn sparked inflation.

Investment bank Morgan Stanley says Asia stands to lose out the most from oil's rise as the region, especially China, is more energy reliant than other emerging markets. Moreover, higher oil prices may also prompt Western buyers to seek suppliers closer to them due to higher delivery costs.

ASIA THREATENED

"The monumental energy price increases will be a 'game change' for Asia," the bank said in a research note. "While there is some scope for remedial policy action ... (Asian currencies outside Japan) will likely weaken against the dollar and assets should underperform in the period ahead."

Some central banks such as Brazil have been praised for their quick reaction but few have managed stem inflation.

"The good side of the rise in emerging markets is that the world economy is now much less reliant on just one economy -- the United States -- and this may be the first time in history a global recession has been avoided because of emerging markets," said HSBC asset management head of global emerging markets Christian Deseglise.

"But it is important we adapt to this rise in demand."

In the short term, most analysts predict oil prices will rise beyond their current records above $145 a barrel. OPEC President Chakib Khelil has predicted prices could hit $170 in the next few months, although they might fall later in the year.

Some investors say recent falls in emerging assets have left them looking good value. However, most agree such an oil price move would be likely to punish emerging markets even more by fuelling inflation and hitting demand and activity.


Дмитрий Марков 7 июл 2008 в 23:41
CRUDE-RICH WINNERS?

Foreign and Colonial head of emerging equities Jeff Chowdhry says he is particularly worried about markets such as South Africa and Turkey, which already have high current account deficits and domestic political problems. "That is a particularly unappealing combination," he said. "If the oil price rises further they are the ones that are going to suffer."

Managing around $2 billion, he says India's stock market has now fallen enough that it is offering good value and he is adding to his position there. But his other key picks are the Gulf and Russia, both taking advantage of higher oil prices.

Other managers are following suit. "Most of the world's provable remaining oil reserves are in emerging markets," said Fidelity's Hammond. "So what you are seeing is a huge flow of money into emerging markets."

Russia should be a key beneficiary, but its stock market is down 3.71 percent so far this year as investors and ratings agencies warn that its economy risks overheating and is struggling with inflation.

Even the popular Gulf economies will see their new oil wealth, as well as the higher fuel costs their own consumers will pay, stoking inflation and straining their economies even as money pours into their coffers.

"This story is negative for everyone," said Morgan Stanley head of foreign exchange strategy Stephen Jen. "There will be a direct reverse of the decoupling story. It's going to be a rough ride."

(additional reporting by Natsuko Waki and Jeremy Gaunt; editing by David Stamp)


Дмитрий Марков 7 июл 2008 в 23:43
Jobs market in for weak spell

NEW YORK (Reuters) - The Conference Board said on Monday there was little reason to expect the U.S. labor market to recover in the months ahead after its jobs index fell in June to its lowest since late 2004.

The private business research group said its Employment Trends Index fell to 111.9 in June from May's revised 112.6. May's figure was originally reported as 113.7.

June's reading was the lowest since it hit 111.3 in September 2004, the Conference Board said.

"Most leading indicators of employment point to an even sharper deterioration in the labor market in the months ahead," said Gad Levanon, senior economist at the Conference Board.

"The steep decline of the employment trends index in recent months, and the fact that its weakness is spread throughout all of its components, does not leave much room for optimism."

The Conference Board launched its Employment Trends Index last month and publishes it on the Monday following each release of the U.S. Bureau of Labor Statistics monthly jobs report.

The latest Conference Board release largely mirrors the payrolls report the government delivered on Thursday. That report showed U.S. employers cut workers for a sixth straight month in June, the longest such streak since 2002.

Financial markets were little moved on the release.

Stocks were higher on Wall Street with the help of stronger overseas equity markets and lower inflation worries as oil prices retreated from last week's record highs. The dollar was broadly higher in quiet trading.

U.S. government bonds, which usually benefit more during weak economic times, were slightly higher in price.

(Reporting by Burton Frierson; Editing by Theodore d'Afflisio)



Дмитрий Марков 7 июл 2008 в 23:47
Итак, да новости негативные на удивление все.
Но:
1. Они уже отыграны
2. Сейчас по индексам дно
Поэтому есть вероятность сыграть на отскоке. ИМХО.


Дмитрий Марков 8 июл 2008 в 18:27
Сейчас сложно говорить о переломе тренда, но предпосылки создаются.
Чего дядя Бэн один стоит, нефть корректируется, бакс чувствует себя увереннее...


Дмитрий Марков 8 июл 2008 в 18:31
Bernanke says Fed may extend Wall Street lending

ARLINGTON, Va (Reuters) - Federal Reserve Chairman Ben Bernanke said on Tuesday the U.S. central bank may keep an emergency lending facility for big Wall Street firms open past year-end while it seeks to restore financial market stability.

In remarks to a mortgage lending forum sponsored by the Federal Deposit Insurance Corp., Bernanke said credit costs have been driven higher and the pace of U.S. economic growth also has been hurt by market turmoil.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end, should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said.

The Fed set up the so-called Primary Dealer Credit Facility, or PDCF, in March as part of its actions in facilitating the purchase of ailing investment bank Bear Stearns by JPMorgan Chase & Co. It said at the time the PDCF would continue for at least six months.

The lending program allows primary dealers -- the biggest firms that deal directly with the Fed -- to borrow directly from the Fed at the discount rate, currently 2.25 percent.

The Fed acted after weeks of turbulence in financial markets had raised fears a credit crisis stemming from rising mortgage defaults was spiraling out of control.

Bernanke said on Tuesday that markets "have improved somewhat since March" but were still under strain.

He said the Fed, working with other regulators at home and abroad, "has redoubled its efforts to strengthen the capital positions, liquidity reserves, and risk-management practices" of financial institutions it supervises.

On Monday, the Fed and the Securities and Exchange Commission reached an agreement on sharing information about banks but Bernanke noted that was to deal with immediate conditions.

"In the longer term, legislation may be needed to provide a more robust framework for the prudential supervision of investment banks and other large securities dealers," he said.

He said that, whereas the SEC now handles oversight of big investment banks under a voluntary agreement with them, in future it should be made clear that a regulator has power to set standards for capital, liquidity holdings and risk management practices of investment banks.

Bernanke said the U.S. central bank and other regulators were considering changes in how derivatives are processed and were assessing so-called repo markets where primary dealers and banks can get secured financing from risk-averse investors.

But he advised caution in making sweeping changes.

"Given the critical role that these markets play in our financial system, we need to proceed in a prudent manner in making changes, especially as long as the broader financial markets are experiencing stress," Bernanke said.

Over time, though, changes may be required in how borrowers and lenders use those markets and in how settlement systems that banks use to process transactions within them are operated.

"Given how important robust payment and settlement systems are to financial stability, a strong case can be made for granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems," Bernanke said.

He also suggested that Congress consider whether "new tools" were needed to allow for the liquidation of big securities firms that were near bankruptcy. That would help to counter a market perception that some firms are seen as "too big to fail" by the government so that they will always be bailed out.

"Despite the complexities of designing a resolution regime for securities firms, I believe it is worth the effort," Bernanke said, adding that "a high bar" for such action should be set so that it would not be chosen lightly.
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Дмитрий Марков 8 июл 2008 в 18:38
G8 sees downside economy risks, prods China on yuan

By Yoko Nishikawa and Alan Wheatley

TOYAKO, Japan (Reuters) - The Group of Eight industrial nations expressed strong concern on Tuesday about sky-high food and oil prices, which they said posed risks for a global economy under serious financial strain.

In a statement released on the second day of the group's three-day annual summit, the G8 made a veiled call for China to let the yuan's tightly controlled exchange rate appreciate to help reduce global financial imbalances.

"In some emerging economies with large and growing current account surpluses, it is crucial that their effective exchange rates move so that necessary adjustment will occur," the G8 said in the statement, without naming any country.

The inclusion of the word "some" marked a subtle difference in wording from last year's G8 communique, which referred to the need for emerging economies in general to let their effective, or trade-weighted, exchange rates rise in value.

The G8 made no other mention of currencies in its communique, but a senior U.S. official said President George W. Bush restated his support for a strong dollar during the talks.

"The president of course reaffirmed his interest in a strong dollar, and his commitment to a strong dollar," Dan Price, Bush's assistant for international economic affairs, told reporters. "There was a general discussion of exchange rates."

Financial markets, which had low expectations of the G8 meeting, shrugged off the comments.

"As for currencies, there were opinions that cooperation among not only G8 countries but also with emerging economies is needed. But there was no specific talk on foreign exchange market movements," a Japanese official said.

DOWNSIDE RISKS

The leaders of Japan, Britain, Canada, Germany, France, Italy, Russia and the United States said they remained positive about the long-term resilience of their economies and the prospects for global growth.

Emerging markets in particular were still growing strongly.

"However, the world economy is now facing uncertainty and downside risks persist. Among others, we express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and increase global inflationary pressure," the G8 said.

Oil has retreated below $142 from a record-breaking rally that lifted prices to an all-time high of $145.85 last week, but it is still up almost 50 percent this year.

"Concerted efforts are needed to address the underlying causes for the benefit of all," the G8 said.


Дмитрий Марков 8 июл 2008 в 18:39
DOHA PLEA

Oil producers needed to boost output and refining capacity in the short term, while joint efforts were necessary to expand upstream and downstream investment in the medium term.

Underlining the shared responsibility of energy-producing and energy-consuming countries, the G8 said it looked forward to a meeting in London later this year that would follow up on talks among producers and consumer states last month in Jeddah.

The G8 said it planned to stage a forum on energy efficiency and new technologies, which would also contribute to enhancing dialogue between the two sides.

One diplomat said this forum would be an opportunity to talk about not just energy security but also oil prices and output.

On the demand side, energy efficiency and energy diversification were priorities, the G8 said.

The G8 said little about the still-unfolding global credit crunch, touched off by a meltdown in the U.S. subprime mortgage market, which has inflicted heavy losses on banks around the world and is dragging down growth in America and Europe.

"Financial market conditions have improved somewhat in the past few months. But serious strains still exist," the G8 said.

Leaders welcomed a meeting of trade ministers in Geneva on July 21 to seek a breakthrough in the World Trade Organization's long-running Doha round of market-opening talks.

They vowed to work as a "matter of urgency" at this crucial stage of negotiations to achieve an "ambitious, balanced and comprehensive" agreement that they said was critical for economic growth and development.

(Additional reporting by Jeremy Pelofsky; Editing by Rodney Joyce)


Дмитрий Марков 8 июл 2008 в 21:38
Pending home sales tumble in May

WASHINGTON (Reuters) - Pending sales of previously owned U.S. homes plummeted by 4.7 percent in May, far more than expected and a sign of more trouble ahead for the beleaguered housing market, a real estate trade group report showed on Tuesday.

Economists polled ahead of the report had been expecting to see a 2.8 percent decrease in the National Association of Realtors index after a 7.1 percent surge in April, which previously had been reported as a 6.3 percent gain.

"The overall decline in contract signings suggests we are not out of the woods by any means," said Lawrence Yun, chief economist at the real estate trade group.

Compared to a year ago, pending sales, which are based on contracts signed in May and seen as a key barometer of future home sales activity, were down 14 percent.

Analysts said things are not likely to improve until next year.

"You are going to see this trend for a while," said Bob Moulton of American Mortgage Group. "People are nervous about their jobs, they are nervous about getting approved and they are nervous about paying too much for a house."

According to the real estate trade group, however, sales activity is widely varied regionally.

"Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. Price conditions vary tremendously, even within a locality, depending upon a neighborhood's exposure to subprime loans," NAR's Yun said.

(Reporting By Joanne Morrison; Editing by Chizu Nomiyama,)


Дмитрий Марков 8 июл 2008 в 21:52
Сейчас происходит медленное движение вверх. Признаков разворота пока нет. Но нужно быть начеку.
Пишите свои мнения по ситуации, если они у вас есть.


Алексей Дронов 8 июл 2008 в 22:06
На завтра вполне возможно закроем гэп на верх,но потом снова вниз.Я считаю,для роста нет твердой почвы,падение не будет линейным,отскоки наверх для выжимания последних денег.


Антон Гребенников 8 июл 2008 в 22:10
Stock exchanges should increase margin deposits on the futures market, which now stand at 5 percent. Someone said they should be increased to 50 percent but it's still small talk at this stage.

спекуляций такими шагами станет поменьше.
-------
Dutch bank ING said on Monday that it was not hard to imagine oil at $200 a barrel before the end of the year -- a level it said would crush demand and could trigger a price plunge in 2009.

вот опять почему должно все обвалится после достижения 200? неаргументирвано..(

---
по мнение - портфель собран) жду роста. спокойно допущу легкую просадку.


Дмитрий Марков 8 июл 2008 в 22:21
Аналогично, Антон. Собрал портфельчик, распродавать пока не собираюсь. На 1/6 часть активно спекулирую (фьючи). Благо фьюч на РТС теперь почти копия американских коллег.


Алексей Дронов 8 июл 2008 в 22:36
На чем расти?Где позитив?На нефти?Когда она вверх,мы вниз,она вниз и мы туда же!Рост будет,но не на этой неделе,отчеты банков не порадуют,снимите розовые очки!


Дмитрий Марков 8 июл 2008 в 22:41
Нефть ещё очень дорога.
На мамбе по многим ликвидным стокам цены близки к минимумам. Даже на пике сегодняшнего завала минимумы не обновлялись. Рынок демонстрирует хорошую сопротивляемость, падает неохотно, а, наоборот, растёт на любой положительной новости. Тут, наверное, больше психологические факторы, чем реальные правят баллом. Конечно, могу ошибаться и роста не будет. Всё ИМХО, а я далеко не профессионал ещё.


Антон Гребенников 8 июл 2008 в 22:51
более того, нефть уже выглядит дешевой)))

расти будем, мы перепроданы по многим бумагам. от 200 ma отскочили будь здоров!


Дмитрий Марков 8 июл 2008 в 23:05
Fed's Lacker Says Gradual Recovery Should Prompt Higher Rates

By Steve Matthews and Craig Torres

July 8 (Bloomberg) -- Federal Reserve Bank of Richmond President Jeffrey Lacker said the central bank should consider raising interest rates to limit inflation as the threat of a steep economic slump begins to fade.

``Just as easing policy in response to emerging downside risks made sense, withdrawing some of that stimulus as those risks diminish makes eminent sense as well,'' Lacker said today in remarks prepared for a speech to the National Economists Club in Washington.

U.S. economic growth has slowed amid record gasoline prices, a decline in credit availability and the deepest housing slump in 25 years. The economy expanded at a 1 percent annual rate in the first quarter, capping the weakest six months of growth in five years, the Commerce Department said June 26.

``I expect growth to be positive, but quite modest for the rest of this year, and to gradually pick up over the course of next year,'' Lacker said. ``Although downside risks to growth are by no means negligible, they have diminished significantly to my mind since the beginning of the year.''

The Fed kept its benchmark interest rate last month at 2 percent, pausing after seven consecutive reductions since September. The Federal Open Market Committee said downside risks to growth had ``diminished somewhat'' and `` upside risks to inflation and inflation expectations have increased.''

Lacker, who doesn't vote on policy this year, dissented in favor of higher interest rates at four policy meetings in 2006.

Traders see a 44 percent chance the Fed will increase its target rate in September, amid rising inflationary pressures from food and gasoline prices. Traders predict no change at the August meeting.

Energy, Food

Energy and food prices pushed the consumer price index up 4.2 percent in the 12 months ending in May. Excluding food and energy, prices rose 2.3 percent during the period.

The world's biggest banks and securities firms have reported $401 billion in asset writedowns and credit losses stemming from the collapse of the U.S. subprime-mortgage market. They've raised $320 billion of capital in response.

Janet Yellen, Federal Reserve Bank of San Francisco president, said yesterday the central bank shouldn't allow any increase in wages and prices to fuel an inflationary cycle similar to the 1970s economy.

``If we saw a wage-price spiral developing, then we need to act,'' she said. ``Nobody wants a repeat of'' the 1970s.