WASHINGTON - President Bush yesterday renewed pressure on the Federal Reserve for lower interest rates to help spur what he called "anemic growth" in the U.S. economy.
Mr. Bush's appeal for lower rates, in an interview on the CBS "This Morning program," came shortly before a report from purchasing managers showed that the manufacturing sector lost some momentum last month.
The index of the National Association of Purchasing Management fell to 52.8% in June from 56.3% in May as growth slowed in new orders, exports, production, and employment.
The latest reading marked the fifth straight month that the index was over 50%, the level generally taken to signal an expansion in manufacturing. But analysts said the lower reading was in line with other recent reports suggesting the economy lacks much punch.
Mr. Bush, asked about interest rates, responded: "I think every American would like to see them lower. That includes the President."
Lower rates would help stimulate the economy, Mr. Bush said, "although I have got to be careful that I don't get in crosswise with the independence of the Federal Reserve Board."
The President's comments, delivered before an audience of tourists invited into the Rose Garden, seemed to be a milder version of the appeal for lower rates that appeared in his interview last week in The New York Times. However, they came at a sensitive time as members of the Federal Open Market Committee met for the second day to review monetary policy.
The purchasing managers' report helped stoke speculation in the bond market that Fed policymakers will trim the federal funds rate to 3.5% from 3.75%, especially if today's unemployment report from the Labor Department shows widespread weakness. This week's announcements of big layoffs of white-collar workers at Hughes Aircraft Co. in Los Angeles and Aetna Life & Casualty Co. in Hartford highlighted the continuing weakness in U.S.labor markets.
However, bond market participants warned that President Bush's appeals to the Fed could backfire and delay any cut in rates if policymakers fear they would be viewed as bending to political pressure. If such sentiment took hold in the market, long-term rates could go up rather than down, they said.
"He doesn't seem to understand that these statements do not do any good," said Lyle Gramley, chief economist for the Mortgage Bankers Association.
Mr. Gramley said he does not believe Fed officials will trim short-term rates because they believe the recovery will continue to unfold in the months ahead. "The market is getting whipsawed all over the place by statistics that looked stronger earlier in the year and statistics that look weaker now," he said. "The economy is not as volatile as these monthly numbers seem to indicate."
Other analysts said Mr. Bush's comments reflected an increasing uneasiness within the administration about the strength of the recovery. "I think that the pressure that the President has attempted to bring to bear on the Fed is quite unusual in its explicitness," said Joel Prakken, vice president for Laurence H. Meyer & Associates, a St. Louis forecasting firm.
"It's hard to be encouraged by the spate of data that have come out over the last month," said Mr. Prakken. "Aggregate demand seems to be flagging, income growth is slow, employment growth is slow, and retail sales and housing are both off their peaks. It's a lousy recovery."
Norman Robertson, chief economist for Mellon Bank in Pittsburgh, said. "A recovery is still under way, but it's a fragile, rather anemic upswing. It is certainly not building any momentum."
Given the continuing debt levels of consumers and business, the federal budget deficit, tight bank lending standards, and other structural problems that will take time to work out, Mr. Robertson said, "I don't think it really matters whether the funds rate is cut by 25 basis points or 50 basis points. It's a cliche, I know, but the Fed is pushing on a piece of string."
The Bush administration wants a recovery "that everyone can see," said Robert Dederick, chief economist of Northern Trust Co. in Chicago. But, he added, "I don't think there is any likelihood the market would take a slight easing as other than a response to sluggish economic data."
