US rates fears as production surges

FEARS that the US Federal Reserve will raise short-term interest rates again were given fresh impetus yesterday by figures showing US industrial production rose for the 10th month in succession and industry's use of capacity reached its highest level since June 1989, writes Peter Torday.

Production rose 0.5 per cent in March, slightly below market expectations. The 0.2 point increase in capacity utilisation, to 83.6 per cent, was also a shade below market forecasts, but both figures were strong enough to suggest the Fed is likely to raise the key Fed Funds rate, now 3.5 per cent, when its policy-making Open Market Committee meets on 17 May.

Worries about a further Fed tightening were also fanned by a survey of consumer sentiment in Michigan, one of the fastest-growing states, which showed a sharp rise in optimism.