European Stars and Stripes (Newspaper) - July 19, 1990, Darmstadt, Hesse                                Page 4 a a the stars and stripes thursday july 19,1990 fed chief urges deficit Cut As a right thing Federal Reserve chairman Alan Greenspan testifies in Congress wednesday. Washington apr Federal Reserve chairman Alan Greenspan sent a Strong signal wednesday that the Central Bank will act decisively to keep the country out of a recession by lowering interest rates once policy makers agree on a Defi Cit reduction package. In his strongest comments to Date Greenspan sought to reassure members of Congress that the fed will do its part in any Effort to significantly attack the huge Federal budget deficit. Many Republican critics of tax increases have charged that president Bush s reversal on the tax question threatens to push the country into a re cession by increasing the tax Burden at a time when the Economy is already growing at a sluggish rate. However Greenspan delivering the feds midyear economic report wednesday said that Quot a major Cut in the budget is unquestionably the right thing to  at the White House spokesman Marlin Fitzwater welcomed Greenspan a comments saying a clearly we have said that one of the reasons we need to get the deficit Down is to take pressure off interest rates and to help bring them Down a certainly that a the direction wed like to see a said Fitzwater. He added that it was a helpful just in knowing that others see the goal of this process the same As we do which is to get interest rates Down and to keep the Economy  while Greenspan said the specific details of any fed response to a deficit reduction package would depend on the Economy a performance at the time he left no doubt that the Central Bank would move to offset the Adverse effects on growth from government spending cuts and tax increases by lowering interest rates. A major substantive credible cuts in the budget deficit would present the Federal Reserve with a situation that would Call for a careful reconsideration of its policy a Greenspan said. A i can Only offer the Assurance that the Federal Reserve will act As it has in the past to Endeavor to. Keep the economic expansion of  the administration on monday dramatically boosted its estimate of the size of the 1991 budget deficit to $168.8 billion far above the $64 billion deficit limit set by the Gram a Rudman balanced budget Law. In presenting the new estimate Treasury Secretary Nicholas Brady and other administration officials said they were counting on the fed to do. Its part to lower interest rates. The administration has been complaining for months that the fed has kept interest rates too High thus slowing economic growth to dangerously Low Levels. After keeping interest rates unchanged since last december the fed took a modest step toward easing them last Friday. It supplied enough additional Cash to the banking system to push a key interest rate the Federal funds rate Down from 8.25 percent to 8 percent. The drop in this rate which Banks charge each other for overnight Loans triggered a big rally on Wall Street pushing the Stock Market to record highs As investors expressed the Hope that farther rate declines would be forthcoming. Food Gas hiked consumer prices 0.5% in june Washington Iasi a b Washington apr consumer prices fuelled by Sharp increases in food and gasoline costs shot up 0.5 percent in june More than double the rate of the past two months the government said wednesday. The unexpectedly Steep Rise in the labor department s consumer Price Index followed moderate 0 2 percent increases for april and May. Through the first six months of the year consumer prices have been rising at an annual rate of 5.9 percent Well above the 4.6 percent for All of 1989. The Sharp Rise in consumer inflation in june was sure to worry analysts who had been predicting a More modest use of 0.3 percent. Analysts had expected inflation to continue to moderate As prices recovered from the first of the year when they soared following a cold snap that sent the costs of fruits vegetables and Energy skyward. Grocery store food prices which had fallen in each of the past two months Rose 1 percent in june As prices went up for All of the major food categories the labor department said. There was a Sharp turnaround in the Price of fruits and vegetables which Rose 1.5 percent after falling 2.4 percent in May. E fresh fruit prices Rose 2.2 percent after seasonal adjustment and fresh vegetables which had increased a Quot Cen the first to months of the year and then fallen 23.6 percent in the next three months advanced 1.4 percent in june the report said. Pork prices up 4.0 percent in june have risen sharply Over the past nine months climbing at an annual rate of 26.2 percent during that period. Poultry prices were up 1.3 percent and Dairy prices after Jun Ping past c months Rose percent in food Overall was up 0.7 percent. Gasoline prices which generally increase during the driving season of the summer months jumped 2 5 percent last month after failing 1,6 percent in May. F Energy costs Overall were up 0.6 percent. The Price of natural Gas shot up 2.7 percent but fuel Oil dropped 4.2 percent and elect City fell 1.6 percent. Prices for items outside the volatile food and Energy sectors jumped 0.4 percent in june. Analysts consider this so called Core rate a better indicator of underlying inflation pressures in the Economy. New car prices edged Down 0,2 percent the fifth straight decline in the face of sluggish sales. Clothing costs which jumped sharply earlier in the Zariv Star ? it  not sprin8 sales off at an Early Start fell 0.1 percent last month  a it men a and women a clothing fell 0.2 a ssh of p j percent respectively but the Cost of Thi rns or l to and toddlers climbed .5 percent. The fall in clothing costs had been expected As merchants marked Down summer Sale clothing fifth1re cos soar �-7 per it june for the . 8 ,1,0se c0sts 9>0 per Cebu Drill a Anos ocl ats Muhe inde pm All consumer fylav90 ast Moth up # a . Housing starts decrease for 5th month in a Row Washington. 11 1  Washington apr housing construction fell in june for the fifth consecutive month pushing the level of building activity to its lowest Point since the Depths of the last recession the government reported wednesday. A the Commerce department reported a drop of 2.3 percent in housing starts last month with new Homes and apartments being built at a seasonally adjusted annual rate of 1.18 million units. The june decline followed decreases of 0.9 percent in May 6.9 percent in april 12.2 percent in March and 5.1 percent in february it marked the first time housing construction has fallen for five months in a Row since a string of declines from july through november in 1981. It pushed the level of building activity to its lowest Point since october 1982. Since interest sensitive sectors such As housing Norn Fly turn Down in Advance of a general slump in the Economy the prolonged weakness in housing this year has raised fears of a possible recession. However housing Industry analysts hold out Hope that the slump May be showing signs of bottoming out. Mortgage rates which shot up from mid december to Early May have been declining since that time giving Hope that potential buyers will be attracted Back to the Market. In one such Glimmer of Hope the government said applications for building permits Rose in june for the first time since ,0anannualrate0f a Quot Quot a was led by a big 10-9 a a a Quot. A a a id they do not exp in  Cuvi y a Reba und signify to an annual rate of 114,000 units a de sold 3 lai8 bacu�8 of Homes Are crease 32 percent from the level of fact Mauiu Vitya Yeargo. Wes8 been put Der Quot fee Cocos a Yew it a its Onn in Prairi tip. A j a i no mid amp St suffered 3 9,2 percent Janua the 3.9 percent pen its grip on credit. The fed made a Small move in that direction last week. For june construction of single family Homes edged Down a slight 0.1 percent to an annual rate of 892,000 units. Construction of multifamily units fell 8 7 percent to an annual rate of 285,000 units. All geographic areas of the country except the South suffered declines in con ----4 7,4 Jaciw Hlll 5v0 an annual rate of 237,000 units ago in percent from activity a year the South was the one Region of the country that enjoyed an increase in construction activity in june with an 8.7 per Cen jump in housing starts to an annual rate of 532,000 units. Even with the gain starts were still 3.7 percent below where they were a year ago