All about business

The unemployment rate could top 10% later this year, the Federal Reserve said Wednesday, but the central bank also said it believes the end of the recession could be in sight.

These forecasts were included in the minutes of the central bank’s June 24 meeting. At that meeting the Fed left its key interest rate near zero percent, but said there were signs of a recovery in some sectors, including the financial markets.

According to the minutes, members of the Fed’s rate-setting committee generally agreed that "the decline in [economic] activity could cease before long."

The current recession, which started in December 2007, is the longest downturn in the U.S. economy since the end of World War II.

Fed policymakers now believe that the unemployment rate will rise to between 9.8% and 10.1% in 2009 before declining modestly next year. The Fed had forecast in April that unemployment would top out in a range of 9.2% to 9.6% this year, but the rate reached 9.5% in June.

The Fed also issued a slightly more optimistic forecast for the economy. The Fed said the nation’s gross domestic product, the broadest measure of economic activity, should decline by between 1% and 1.5% in 2009, compared to an earlier forecast of a drop of between 1.3% to 2%.

Policymakers also raised their forecast for GDP growth in 2010 and 2011, calling for growth of between 2.1% and 3.3% next year and growth of 3.8% to 4.6% the following year.

The Fed said in its forecast that it expected a "sluggish" recovery in the second half of this year, and that problems in the credit markets would allow for only gradual improvement in the economy next year.

The central bank also said most of its members believe it could take as long as five or six years for the economy to achieve a sustainable growth rate and for desired levels of unemployment and inflation to meet the central bank’s objectives payday loan online.

Rich Yamarone, director of economic research at Argus Research, said the Fed minutes showed that the central bank is still concerned about the state of the economy and any possible recovery.

He pointed out that even as the Fed talked of signs of a possible turnaround, it warned that the economy is "still quite weak and vulnerable to further adverse shocks." And he said some of those shocks, including rising job losses and the threat of bankruptcy at leading small business lender CIT Group (CIT, Fortune 500), still loom.

"I don’t think the Fed is about to hang the ‘Mission accomplished’ sign," he said.

Brian Bethune, chief U.S. financial economist at Global Insight, agreed that the Fed is still very worried about the economy. He said the Fed is likely to keep rates low and maintain various programs designed to spur spending and lending for an extended period of time.

Bethune noted that the Fed is still expecting the unemployment rate to be in the 8.4% to 8.8% in 2011, well above the expected longer-term unemployment rate of 4.8% to 5%.

"There seems to be a Grand Canyon in between those two numbers," he said.

But David Wyss, chief economist at Standard & Poor’s, said that it’s also clear that the central bank is less worried now than it was at its April meeting.

"They’ve shifted to a more neutral stance from a downbeat one," he said. "That’s an important change." 

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After 18 months of study the federal government has finally decided to privatize a portion of Atomic Energy of Canada Ltd., but how the problem-plagued nuclear company will be restructured won’t be known for several months.

Natural Resources Minister Lisa Raitt told reporters today that Mississauga-based Atomic Energy faces stiff competition from much larger, better-funded rivals and is simply too small to take advantage of the "nuclear renaissance" taking place worldwide.

An internal ministry review concluded that Atomic Energy’s commercial Candu reactor division "can be best served by a strategic alliance with one or more partners with global scale that can leverage the technology, skills and experience of AECL in Canada and internationally."

The review said a strategic alliance could take the form of a joint venture or merger with another nuclear reactor supplier or the sale of a minority or majority equity interest in Atomic Energy.

"We’re going to review all the options that are put forward," said Raitt. "We can’t speculate on what may or may not be on the table with respect to private equity."

Ottawa also plans to separate the Candu division from Atomic Energy’s research division, which includes its troubled Chalk River laboratory and National Research Universal reactor that produces up to half of the world’s medical isotope supply.

A heavy-water leak shut down the 52-year-old NRU reactor two weeks ago, and the company says it will be out of commission for at least three months. It’s the Chalk River reactor’s second major shutdown in two years.

AECL also scrapped two MAPLE reactors last year due to design flaws car insurance quote. The MAPLEs were meant to replace the NRU reactor. They were millions of dollars over budget and years behind schedule when the Tories pulled the plug.

The research division has been a drain on the commercial division, the review said. "AECL has not been profitable for the last five years as a consolidated entity, a situation that persists despite the commercial revenue it has generated and the infusion of significant government funding."

Raitt said an expert panel will be created that will determine the future management structure at Chalk River, including the possibility of bringing in private-sector management.

The partial privatization of Atomic Energy’s commercial division has been long anticipated, and many companies, including French rival Areva SA, Canadian engineering partner SNC Lavalin Inc., Ontario nuclear operator Bruce Power, and U.S. reactor supplier General Electric have expressed an interest in partnering with or owning a piece of the crown corporation.

Ottawa’s decision to restructure Atomic Energy comes as Ontario weighs bids from reactor supplier for a newly planned nuclear plant at Darlington. Atomic Energy is competing against Areva and U.S.-based Westinghouse Electric for the business.

Energy and Infrastructure Minister George Smitherman was expected to announce a reactor supplier by June 21 but has hinted lately that the decision, originally expected last December, may be delayed for a second time.

With files from The Canadian Press

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Sales of U.S. existing homes rose in April compared with the previous month, economists polled by Reuters forecast.

A poll of 66 economists by Reuters produced a median forecast of 4.66 million sales of existing homes on a seasonally-adjusted, annualized basis, in April. That would be up from 4.57 million sales in March.

Analysts noted that the pending sales index rose 3 percent in March, an encouraging sign for April sales.

Meanwhile, the number of existing homes for sale dropped slightly to 3.74 million in March.

Still, economists noted that foreclosures are still on the rise and that there is a large stock of “shadow” inventory, describing when would-be sellers put their houses back on the market when demand seems to be healthier.

“The trend is flat,” concluded Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

The National Association of Realtors will release the monthly data at 10 a.m. EDT on Wednesday.

A sampling of forecasts and analysis on the upcoming consumer price data follows:

CARL RICCADONNA, DIRECTOR, SENIOR U.S. ECONOMIST, DEUTSCHE

BANK SECURITIES, NEW YORK:

Forecast: 4.65 million units

“We look for a 1 no fax quick cash.8 percent increase in April over March sales. We have seen some evidence that the housing market is bottoming and that things are turning up just a bit. The pending home sales series has had some gains in recent months. While it’s good news that things are turning up, I wouldn’t look for a big rebound here. Sales are just bouncing along the bottom at this point.”

MICHAEL MORAN, CHIEF ECONOMIST, DAIWA SECURITIES AMERICA, NEW YORK: Forecast: 4.7 million units

“We’re looking for a 2.8 percent increase in existing home sales. If you look at the recent pattern of home sales it seems as though they have formed a bottom. In addition to that, a low interest-rate environment has stirred the interest of some potential buyers. Also, Congress has sweetened tax incentives for first-time home buyers. So I look for at least steady, and possibly improved, home sales. There are negative factors to be sure, such as the weak labor market and continued declines in home prices. Both of those factors could have kept potential buyers sidelined.”

RBS SECURITIES: 

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Microsoft Corp. Monday sold a $3.75 billion debt issue in its first foray into the U.S. corporate bond market, joining a spate of companies taking advantage of beneficial borrowing conditions.

The cash-rich, "triple-A" rated Microsoft announced its first debt authorization last September, allowing it to issue up to $6 billion in debt. Monday’s bond sale attracted well over $10 billion in demand, market sources said.

The sale included $2 billion of five-year notes yielding about 95 basis points over comparable U.S. Treasurys, $1 billion of 10-year notes yielding about 105 basis points over Treasurys and $750 million of 30-year bonds yielding about 105 basis points over Treasurys, according to IFR, a Thomson Reuters service.

Microsoft (MSFT, Fortune 500), the world’s largest software maker, has already issued about a third of its $6 billion debt authorization in the commercial paper market.

It says it does not need financing, but will use the proceeds for general corporate purposes, including working capital and buying back stock, according to a spokesman.

The company decided to take advantage of "good market conditions and Microsoft’s great credit rating," a spokesman said. The software giant is one of only a handful of U.S. companies still rated ‘AAA’ by both Moody’s Investor Service and Standard & Poor’s.

Fitch rates it one notch lower at ‘AA-plus’.

"I think people thought it might be the only shot in a lifetime to lend money to Microsoft," said Robert Bishop, portfolio manager at SCM Advisors in San Francisco. "When a company is borrowing and they don’t really need the money, you don’t know when you’re going to get another shot at them."

As of the end of March, Microsoft reportedly had cash and short-term investments worth $25.3 billion.

The sale did well because "Microsoft is a great credit and everybody’s got a place in their portfolio for a few high quality credits," Bishop added. Still, he declined to participate because yields being offered "didn’t seem like great value."

The bond sale benefited from massive investor cash flowing into corporate bonds as tentative signs of economic recovery improve investors’ appetite for risk faxless payday loan.

"An awful lot of people want to pile into the credit markets now," Bishop said. "They think things are better but the problem is, I think they probably don’t realize how much spreads have tightened over the course of the last two months."

Corporate bonds started attracting demand when their yield spreads hit a record 656 basis points over Treasurys last December. As the market rallied, spreads have narrowed to just 444 basis points, according to Merrill Lynch data.

But companies are taking advantage of the falling yield spreads, with more than $26 billion of U.S. corporate bonds sold in just the first six business days of the month, according to Thomson Reuters data.

"It seems to me that there’s almost an urgent need for issuers to announce a deal as quickly as they can to catch the market before it does turn the other way," said Richard Lee, head of fixed income at New York broker-dealer Wall Street Access.

The corporate bond market appeared to already be softening on Monday, with spreads suffering their first widening in weeks under the spate of heavy supply.

Microsoft’s shares ended down 10 cents at $19.32 on Nasdaq.

Its bond sale was led by JPMorgan (JPM, Fortune 500) and Morgan Stanley (MS, Fortune 500), with Banc of America Securities and Citigroup (C, Fortune 500) as passive managers.

The debt sale had sparked talk that Microsoft could be readying a bid for German business management software firm SAP, in light of a recent article in Barron’s citing an analyst as saying SAP cannot remain independent forever.

SAP Co-Chief Executive Leo Apotheker, in New York unveiling an acquisition, declined to comment on a possible Microsoft bid but did say he believes his firm should stay independent.

SAP’s stock rose 2.85% in Germany. 

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The bankruptcy judge who oversaw the massive cleanup after the Enron and WorldCom meltdowns has a new challenge that may be his toughest yet - overhauling Chrysler LLC.

Judge Arthur Gonzalez of U.S. Bankruptcy Court in Manhattan was assigned the case Thursday after the iconic carmaker sought Chapter 11 bankruptcy protection following the breakdown of intense negotiations with lenders.

Chrysler filed the case in one of the premier federal bankruptcy courts, and Gonzalez is one of its most experienced judges.

He simultaneously handled the Enron and WorldCom bankruptcies earlier this decade - both filed after massive accounting frauds were unearthed at the companies.

"We have a judge here with experience, who did Enron and WorldCom at the same time, so he’s not afraid of work and he understands complex issues," said Natasha Labovitz, a partner in the restructuring group at law firm Kirkland & Ellis LLP, who has appeared before the judge.

A former New York City schoolteacher, Gonzalez took the bench in 1995 after monitoring bankruptcies for the government as a U.S. Trustee for New York, Connecticut, and Vermont.

"He is experienced, wise, patient and fair," said Martin Bienenstock, a bankruptcy attorney at law firm Dewey & LeBoeuf LLP, who represented Enron in its bankruptcy. "He works indefatigably and keeps a sense of humor."

‘Been there, done that’

Gonzalez will "not at all" be put off by a big case with national attention, Bienenstock said payday cash advance. "He’s been there, done that."

If the company and government officials have their way, Chrysler’s most profitable units will emerge from bankruptcy in 30 to 60 days as a new company - a rapid-fire sale process in which the judge will face big decisions early in the case. But other aspects of the case could drag on for years.

The first-day hearing in the case is set for Friday morning.

Gonzalez received a bachelor’s degree in accounting from New York’s Fordham University in 1969 and a master’s degree in education from Brooklyn College in 1974. He was a public school teacher for 13 years.

He got his law degree at Fordham’s law school in 1982 and a master of law degree in 1990 from New York University Law School.

Other cases Judge Gonzalez has handled include the Chapter 11 filing by appliance maker Sunbeam Corp. in 2001.

He also oversaw the bankruptcies of Iridium LLC, a satellite telephone service, and the collapse of Livent Inc., a Canadian theater-production company that fell apart amid accounting irregularities. 

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The U.S. trade deficit shrank nearly 29 percent in November, the largest amount in 12 years, as weak consumer demand and plummeting oil prices caused imports to sink by a record amount.

The $40.4 billion trade gap was the lowest since November 2003, the Commerce Department said in its monthly report on Tuesday, and another sign of how the global financial crisis has damaged world commerce.

Both U.S. imports and exports declined for the fourth consecutive month after hitting record peaks in July.

“It really says the wolf is at the door. Americans aren’t buying anything,” said Ed Gresser, director of the Progressive Policy Institute’s trade office. “The problem isn’t competition, but lack of demand for anybody’s product.”

The much smaller-than-expected deficit could trim slightly estimates of how much the U.S. economy contracted in the fourth quarter of 2008, analysts said.

But with the report showing consumer demand falling sharply at home and abroad, it is hard to call it good news, said Nigel Gault, chief U.S. economist with Global Insight in Lexington, Massachusetts.

“It is slim comfort that the U.S. cut its demand for imports more rapidly than the rest of the world cut its demand for U.S. exports. That might cushion the U.S. downturn a little, but it is not a route to recovery,” Gault said.

U.S. stocks were little changed on Tuesday, but supported by the hope Congress would quickly release a remaining $350 billion in rescue funds to help stabilize credit markets paydayloans.

The dollar extended gains against the euro on the trade data and also rose against the yen.

U.S. imports in November fell a record 12 percent to $183.2 billion, as the global financial crisis scared businesses and consumers into cutting their spending.

U.S. exports fell 5.8 percent in November to $142.8 billion. Total U.S. goods exports were the lowest since June 2007, while auto and auto part exports were the lowest since October 2006.

Imports of both capital and consumers goods were the lowest since mid-2006, while auto and auto part imports fell to levels not seen since August 2003.

The average price for imported oil plunged a record $25.30 per barrel in November as recession fears deepened. Along with the drop in prices to $66.72 a barrel, the average daily volume of U.S. oil imports fell 1.7 million barrels.

Oil prices have continued to fall since November, suggesting even smaller trade gaps in the months ahead.

“The beauty part is that the trade deficit will shrink as much in the next couple of months because oil prices fell at a pretty constant rate,” said Christopher Low, chief economist at FTN Financial in New York. 

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When the nation’s construction industry suffers, architects are among the first to notice. So, it’s no surprise that things have begun to slow down at local firms.

"You see the architects as the canary in the mine shaft," said Dan Jay, principal at the St. Louis architecture firm Christner Inc. "We’re the first to feel the pinch."

Jay’s firm is among several in St. Louis that have been forced to lay off workers because of a lack of work. Across St. Louis’ 175 firms, about 200 architects and support service workers have been laid off since October, according to an estimate by Michelle Swatek, executive director of the American Institute of Architects’ St. Louis office.

Nationally, the level of billings and inquiries for architectural work dropped to historic lows in October, according to the most recent monthly survey of firms performed by the American Institute of Architecture.

Many architecture companies are small, so tough times can be particularly hard on the profession, said Kermit Baker, chief economist for AIA. Like most small businesses, these firms often don’t have massive cash reserves and, on average, have only five to seven months of work lined up.

"It’s a struggle to keep current customers paying on time and keep your staff billable," Baker said. "The general sense is most firms have excess staffing now and are waiting for new project work to come in."

This isn’t the first time the profession has experienced trouble, so companies prepare for the lean times. For example, in 2000, when commercial construction began a four-year slide, Pat Whitaker made changes at her firm, Arcturis.

At the time, most of the company’s revenue came from corporate clients. So Arcturis tried to add clients from the public sector — higher education and data centers, Whitaker said. It also stretched into planning, civil engineering and graphic design. As a result, Arcturis more than quadrupled revenue from $4.2 million in 2002 to $19 million in 2008 and increased from 50 to 140 workers, she said.

Many architecture firms similarly have diversified, Whitaker noted. At Arcturis, such moves have helped it remain relatively stable in tough times, even though it recently laid off 15 people. But in hopes of bringing some workers back when conditions improve, the firm provided severance pay and outplacement services to laid-off workers.

"We saw (layoffs) coming, but there’s not much you can do," Whitaker said.

easy fast payday loans.stltoday.com/stltoday/images/bullet.gif” width=”5″ height=”5″ alt=”bullet” border=”0″/> Key U.S. rate, bank loans show rescue not working

 Stocks stumble amid manufacturing woes

Architect Dan Kirchner saw it coming two weeks ago when he was laid off from another local company. Kirchner, 46, spend 15 years at a company that focused on redesigning retail buildings.

"The retailers aren’t doing so well and most business expansions are based on sales," said Kirchner, who lives in House Springs. "If the sales aren’t there, they’re not going to expand."

It was the second time Kirchner has been laid off, so when he got the news, he was disappointed but not surprised.

Not all firms are experiencing difficulties, though. Since October, Clayton-based Bond Wolfe Architects has increased its employment by two to 18 and it will be hiring one more person in coming months, said Susan Pruchnicki, principal. But the hirings don’t mean Pruchnicki is ignoring what’s going on. She said she’s simply responding to the demand.

"I’m waiting for the other shoe to drop," Pruchnicki said. "But right now, we have work to do. We are busy. It’s a service-based industry."

Bond Wolfe is staying busy by focusing on projects such as firehouses or schools. Others try projects outside the region.

That tactic can provide temporary relief. But out-of-town companies usually do the same kind of thing.

Perhaps all that can be done, Pruchnicki said, is for architects to be patient.

"We are an economy-driven industry," she said "We require people to build stuff to keep busy … I think if people stay calm and look at the big picture, it’s natural that these things happen."

That may be true, but the fluctuations have left some architects, such as Dan Kirchner, deeply concerned. He hopes demand for environmental building standards will create more jobs soon. But after a six-month layoff early in his career, he won’t wait much longer. "If nothing comes up in six months, I’ll switch to another career," he said.

cboyce@post-dispatch.com | 314-340-8345

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Dear Annie: I work in an office with about 40 peers (and 2 bosses), and rumors are rife that about 10 or 12 of us are going to get laid off as part of the latest cost-cutting drive. The situation has really brought out the worst in some of my colleagues, who are kissing up to the bosses, spreading damaging gossip about certain people, and generally acting in ways that are, in my opinion, highly unprofessional. Should I just ignore all this, or would it be smart to point out to higher-ups (discreetly) that there is a lot of self-serving behavior going on here? -Avoiding the Water Cooler

Dear AWC: If your bosses aren’t already aware of your colleagues’ Machiavellian maneuvers - and I bet they are - then telling them what’s going on is just going to look self-serving on your part (and, let’s be frank here, rightly so). No surprise: A recent survey of 522 office workers found that more than half (53%) say underhanded behavior has increased at work lately.

"In times of uncertainty and rising unemployment, some people feel insecure, which leads them to start trying to curry favor with decision-makers any way they can," says Jon Zion, CEO of staffing firm Accountemps, which hired an independent research firm to conduct the survey a couple of months ago. "It’s a mistaken strategy because, in general, office politics just drains productivity and damages morale. You’re far better off staying focused on your job. In the end we’re all measured on results."

A cynic would say that’s not always entirely true but, on the other hand, we’ve all known people who have aimed to undermine a colleague and ended up shooting themselves in the foot. Still, only 29% of those surveyed said that it’s best to steer clear of office politics completely. A majority, 54%, opined that the smart course is to be aware of what’s going on without getting directly involved. The other 16% said that "it’s best to participate [in political maneuvering] so you can get ahead."

Zion and his colleagues divide that small group into five distinct types. See if any of these sound familiar:

1. The Pundit. "This is the person who sits around at lunch, or hangs around the water cooler, endlessly speculating about ‘what’s really going on’ and seeming to have inside information," observes Zion. "Every once in a while, usually just by coincidence, these people turn out to be right." Tempting as it may be to listen - "after all, knowledge is power," he notes - the worst thing you can do is give the Pundit any information about anything: "You never know how it will get twisted."

2. The Lobbyist. A vocal advocate of his or her projects, and often skilled at getting other people to go along, the Lobbyist "may be unreceptive to outside points of view," Zion says creditscore.com. "It’s okay to support this person’s agenda, but you need to be careful not to get run over. Make sure your own point of view gets heard."

3. The Covert Operator. "These are not hard to spot," says Zion. "They’re the people trying to use manipulation rather than excellent work to get ahead - and they can be very charming, so keep your guard up." You might even show the Covert Operator that you’re on to him, by politely objecting when he puts down a colleague or takes credit for someone else’s work.

4. The Activist. Enthusiasm is contagious, so you may find yourself getting swept up in this person’s cause. "An Activist can be a very persuasive and aggressive advocate for what he or she believes is the right thing to do," Zion says. But watch out: "You don’t necessarily want to be identified with a cause that doesn’t benefit your employer’s big-picture goals," says Zion. "You’re at work to do a job, not to get caught up in extraneous stuff that, 9 times out of 10, isn’t going to benefit you."

5. The Advisor. "This is an interesting type," says Zion, "because this person is often closely aligned with a company’s top leadership and serves as senior managers’ eyes and ears." Advisors don’t always rank high in the official pecking order: "The Advisor could be anybody - a senior aide or an administrative assistant." Don’t kiss up, but don’t alienate this person, either: "Advisors wield considerable behind-the-scenes influence, so a decent rapport with them could ultimately work in your favor."

If there’s any job security at all these days, Zion says, it depends not on sneaky tactics but on being really great at your actual job.

"The important thing is to concentrate on your performance, demonstrate to your bosses why you are indispensable, and not get embroiled in office politics," he says. Easier said than done, but look at it this way: If you stand out as a star performer, then even if you do get laid off, at least you’ll have terrific references for your job hunt.

Readers, what do you say? Have office politics gotten nastier at your shop lately? What type of behavior bothers you the most or seems to cause the most trouble? Any tips for handling office politics? Post your thoughts on the Ask Annie blog. 

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Reserve Bank of India Governor Duvvuri Subbarao, in the job two months, insists his priority is to fight inflation. The trouble is, the battlefield keeps changing.

India's money-market rates tumbled earlier this month after Subbarao reduced the amount of money that lenders must hold in reserve, giving the new central bank chief room to keep benchmark interest rates unchanged in his first quarterly monetary-policy statement on Oct. 24.

Since then, the rate at which Indian banks lend to each other overnight has more than tripled, increasing speculation that Subbarao will be forced to cut the reserve requirement again. Elsewhere in Asia, rates have declined as the Federal Reserve pledged to inject more U.S. currency into money markets and global central banks cut borrowing costs to spur lending.

“Subbarao's policy stance is dictated by movements in India's money-market rates, which aren't following the rest of the region,'' said N. R. Bhanumurthy, an economist at the Institute of Economic Growth in New Delhi. “Rising call rates don't give him time to assess whether inflation is a problem.''

The rate at which Indian banks lend to each other touched 21 percent today. India's 10-year bonds gained, heading for their best month in almost a decade, on speculation policy makers will be forced to step up efforts to boost cash with banks and ease a credit squeeze.

`Bigger Problem'

Hong Kong's three-month interbank offered rate, or Hibor, fell 4.6 basis points today to a one-week low of 3.35 percent, according to the 11 a.m. fixing by Hong Kong Association of Banks. The similar rate for U.S. dollar loans in Singapore, or Sibor, plunged 19 basis points to 3.09 percent, the lowest since Sept. 17, according to the Association of Banks in Singapore.

Inflation in India may be easing, making Subbarao more comfortable about reducing interest rates to support growth.

Once he has time to assess where inflation is heading, Subbarao “may veer around to the point that growth may be a bigger problem now,'' said D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group in New Delhi.

Commerce Ministry figures yesterday validate that view: India's inflation rate fell below 11 percent for the first time since May, rising 10 freecreditreport.68 percent in the third week of this month.

“Inflation is not going to be a big problem in India going forward,'' said Hugo Navarro, international economist at Capital Economics Ltd. in London. “We expect a further easing in monetary policy to support economic growth.''

Credit Crunch

Subbarao lowered the benchmark repurchase rate by 1 percentage point last week to 8 percent to cushion Asia's third- largest economy from a global credit crunch.

He followed the cut with a quarterly monetary policy statement on Oct. 24 that placed equal emphasis on controlling inflation and backing economic expansion. The stance caused bonds to decline the most in almost three months and the stock index to fall by 11 percent.

Subbarao, 59, told reporters that food prices may pick up because the country's winter crop harvest will be less than previously anticipated. And global crude oil prices — while coming down — are subject to volatility, he said.

The governor also said a weakening rupee, which increases import costs, adds to the inflationary risks. The rupee has dropped 21 percent against the dollar this year.

Meanwhile, Prime Minister Manmohan Singh is piling on the pressure to lower rates. He told parliament two weeks ago that there is a “clear deceleration'' in inflation, while warning of a “temporary slowdown'' in the Indian economy. Singh said the precise impact would depend on the depth and duration of the global slowdown.

Slowing Growth

“The central bank seems to be giving more emphasis than perhaps is necessary on inflation, especially given the significant drop in commodity prices,'' said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. “In the current global setting, it should be putting more policy easing in place because the economy is screaming for it.''

Reserve Bank economists are already paring their forecasts. The central bank on Oct. 24 cut its economic growth forecast to 7.5 percent from 8 percent in the year to March 31. It retained its forecast for inflation to slow to 7 percent by March 31.

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Former Federal Reserve Chairman Alan Greenspan said financial markets and the economy will recover “sooner rather than later'' from the worst turmoil in seven decades.

“Trust will eventually reemerge as investors dip hesitantly back into the marketplace,'' Greenspan said today in a speech at Georgetown University's law school in Washington. “From that point, history tells us, financial and economic revival sets in. I suspect it will be sooner rather than later.''

Greenspan urged lawmakers last week to back “extensive'' measures to tackle the worst financial crisis since the 1930s and head off a recession. The U.S. Senate passed a $700 billion financial-market rescue package yesterday loaded with inducements for the House of Representatives to approve the measure following its rejection of an earlier version Sept. 29.

“We are living through the type of wrenching financial crisis that comes along only once in a century,'' Greenspan said today. “Financial markets freeze up as an excess of fear displaces a protracted period of what some might call irrational exuberance. Eventually the market freeze will thaw as frightened investors take tentative steps towards reengagement with risk.''

Greenspan, 82, who served 18 years as Fed chief, took office just before the 1987 stock-market crash. He led the central bank during two eight-month-long recessions, the Asian financial crisis, the 2001 terrorist attacks and the bursting of the Internet bubble faxless payday loan.

Deepening Crisis

He spoke amid signs the crisis was deepening. Corporate short-term borrowing plummeted 5.6 percent, the most on record, to the lowest amount outstanding in three years, the Fed said today. Separately, the cost of borrowing in dollars for three months in London rose for a fourth day as banks hoarded cash.

Greenspan, while not commenting today on the rescue bill, spoke from a text about the importance of property rights at a conference entitled, “Our Courts and Corporate Citizenship.'' He didn't take audience questions.

“Broken market ties among banks, pension and hedge funds and all types of non-financial businesses, will become reestablished, and our complex economy, that has the capacity to produce a fifth of the world's goods and services, will reemerge,'' he said.

The House may vote tomorrow afternoon on the rescue bill.

In a statement e-mailed to lawmakers Sept. 25, signed by Greenspan, former Treasury Secretary George Shultz and Stanford University economist Robert Hall, the three economists wrote that “the only way that financial institutions can continue to function is for the government to provide financial support.''

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