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Base rates and the business outlook: the AFP survey

Business conditions are set to improve over the next 12 months although the cost of borrowing and issuing debt will also rise, according to a survey carried out at the Association of Financial Professionals (AFP) annual conference in San Diego, US. Over 50% of finance professionals believe the re-election of George W. Bush will have a positive impact on business conditions in the US, 17% foresee a detrimental impact while 29% predict little change.

The finance professionals are far less equivocal about base rates, however, with three quarters of respondents saying that Alan Greenspan at the Federal Reserve will increase interest rates during 2005. Just under two-thirds predict an increase of between 25 and 75 basis points, while 13% are forecasting a 100 basis point rise.

?With responsibilities that include managing trillions of dollars through the global financial markets each day, and making decisions that are critical to corporate performance, AFP members have a unique view of the US economy,? comments Jim Kaitz, president and the CEO of the AFP.

The survey also notes that 42% see terrorism as the greatest threat to economic prosperity, followed closely by federal government deficit spending (41%), rising interest rates (37%) and the outsourcing of jobs to foreign countries (32%).

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