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Brazilian inflation will quicken above policy makers’ target this year, according to economists surveyed by the central bank.

Consumer prices, as measured by the benchmark IPCA index, will rise 4.6 percent this year, up from a week-earlier forecast of 4.5 percent, according to the median forecast in a Jan. 22 central bank survey published today. The bank targets inflation of 4.5 percent plus or minus 2 percentage points.

Traders expect the central bank to raise interest rates to at least 9 percent, up from a record low 8.75 percent, as early as March to keep inflation in check, according to Bloomberg estimates based on interest rate futures contracts. The benchmark lending rate will be pushed up to 11.25 percent by year-end, according to the central bank survey.

“March would be a good month to start raising rates and to send out a clear message — the central bank is watching inflation and is ready to increase rates as needed,” Carlos Eduardo de Freitas, a former central bank director, said in an interview from Rio de Janeiro guaranteed payday loans.

The annual inflation rate is likely to remain between 4 percent and 4.5 percent if policy makers start acting in March, said Freitas, who is a partner at OF Consultoria Economica, an economic research company in Brasilia.

“Should they wait until the last quarter of the year, consumer prices could rise more than 5 percent this year,” he said.

Economists in the bank’s weekly survey forecast that Latin America’s biggest economy will expand 5.3 percent this year, after contracting 0.26 percent in 2009.

The real gained 0.2 percent to 1.8210 per U.S. dollar at 11:18 a.m. New York time from 1.8247 on Jan. 22.

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IMPERIAL — John V. Price won’t sell you a house. But he’ll sell you a place to build your dream home.

Price, 62, owns Price Acreage LLC, a family-operated business that has been developing semi-rural and suburban home sites in Jefferson and St. Francois counties.

The company subdivides large tracts of wooded land, extends roads and utilities to the rural site, and then sells individual plots of one to six acres each to buyers who later contract with their own homebuilders.

"The freedom to build what they want when they want to build" attracts buyers, Price said. "The lots are big, and different house styles in that environment don’t clash."

He first got into the real estate business with his father, Homer V. Price, who developed subdivisions and home sites in Jefferson County for nearly 50 years before his death in 2004. Among Homer Price’s developments was Olympian Village during the 1960s. After this father’s death, John Price founded Price Acreage.

John Price’s latest project is the Hollows at Frisco Hill subdivision in the Imperial area.

He said the 48 large, heavily wooded lots at the Hollows were particularly attractive because the development is less than 15 minutes from south St. Louis County.

The access roads and utilities are now in place, and the first lots are being sold.

Five deals have closed on the lots since they went on the market early in December, Price said. He said he expected construction of the first houses in the development to start this month, weather permitting.

"It’s a great, great location," he said. "It’s extremely convenient to everything."

The 90-acre development is just southwest of the intersection of Frisco Hill Road and Ambrose Crossing, along the new Frisco Hollows Road that serves the site.

The lots sell for about $69,000 to more than $140,000 each, depending on the size. The average cost of a lot is about $80,000.

Price said that was a good deal — coupled with housing construction costs of $200,000 or so — for a big house on a big lot near the city.

The Hollows does have some restrictions on construction. Houses must have a minimum of 2,000 square feet of floor space and garages that hold at least two cars.

A large range of home styles is allowed, but also within some restrictions on building materials and designs.

Eventually, a property committee of at least three Hollows property owners will be formed to maintain the subdivision roads. The committee also will collect subdivision assessments to be established for community expenditures, such as electric bills for street lights, common ground maintenance, snow removal and road repairs, Price said.

So far, most of the buyers and prospective buyers he’s worked with already live in the Imperial area, Price said. They know about the convenience of the area and simply want to move up to nicer, more private homes at a reasonable cost, he said.

"Our customers are generally pretty sophisticated, and they know what lots cost here and elsewhere," Price said.

The developers had tried to maintain the natural woods as much as possible in subdividing the site and building access roads, said Jeff Price, 27, who works with his father on the Hollows.

"We build to the land, not through the land," he said. "We strive for quality over quantity."

Jeff Price said the trees that did have to be removed for the development were ground into mulch for use by tract buyers.

"On many construction projects, that would have got hauled off and just thrown away," he said.

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The health care reform bill approved by the Senate on Thursday would do more than any proposal yet to reduce the deficit over time - by an estimated $132 billion over 10 years and by substantially more thereafter.

But reducing the deficit is not entirely synonymous with the oft-stated goal of health reform: reducing the growth rate in health care costs and expenditures - often referred to as "bending the cost curve."

That growth rate is what drives federal spending on Medicare and other federal health programs.

And it’s what budget experts say will pummel the federal budget in future years if nothing is done to change it.

So how would the Senate bill fare in bending the cost curve from the perspective of the federal budget? The short answer is the ever-unsatisfying "it depends."

The Congressional Budget Office estimates the bill could over time reduce the federal budget commitment to health care - that’s spending on programs like Medicare plus the amount of health-related federal tax breaks.

For instance, the CBO estimates that Medicare spending per beneficiary would grow by an average of 2% on an inflation-adjusted basis over the next two decades. That’s half the 4% annual growth rate that has marked the past two decades.

But that estimated reduction is highly dependent on a number of factors.

More than anything, it depends on whether this and future Congresses will do what the bill says … to the letter. The budget agency noted such stick-to-itiveness is rare when it comes to major legislation and said the bill includes measures that "might be difficult to sustain over a long period of time" - such as reduced pay increases for various Medicare service providers.

And reducing the federal budgetary commitment to health care also depends on how well the cost-bending provisions in the legislation work.

In addition to the Medicare savings called for in the bill, two other major provisions could help bend the cost curve, according to former CBO Director Donald Marron.

The first is the creation of an Independent Payment Advisory Board that would recommend ways to reduce Medicare’s spending growth beyond what the legislation calls for. The second is the establishment of an excise tax on very expensive health plans intended to encourage employers and their workers to become more consumer savvy in their health spending choices.

The CBO said in particular that the bill’s savings potential depends on whether the new Medicare board’s recommendations effectively control the growth rate in Medicare spending.

"We need real entitlement reform," said Douglas Holtz-Eakin, another former CBO director. He thinks the board could help make meaningful fixes, but he doubts that Congress will follow the board’s toughest recommendations payday loans for bad credit.

Savings could be jeopardized, further, if any cost-bending provision is weakened or eliminated when the Senate and House hammer out their differences early next year on what a final health reform bill should look like.

Lastly, how far the Senate bill bends the cost curve depends on the success of pilot programs in the legislation designed to make health care delivery more cost-efficient.

"They’re setting up a framework under which we can learn what bends the cost curve over time," said Josh Gordon, policy director at the Concord Coalition, a deficit watchdog group.

In the meantime, while the bill is projected to reduce the deficit in between 2010 and 2019, the federal budget commitment to health care will increase by an estimated $200 billion because of provisions in the bill that call for, among other things, the federal government to subsidize the purchase of insurance by many Americans.

Best-case scenario

CBO estimates are never flawless. The agency strives to offer middle-of-the-road readings, neither too optimistic nor too pessimistic. And they’re based on the language of legislation, not the political realities of Congress.

"I would say the risks [including the political ones] tend to lean towards everything costing more and saving less, but it isn’t out of the realm of possibility that the bill could save more than CBO suggests," Gordon said.

Assume for a moment, though, that the CBO analysis is dead-on. The agency estimates that the Senate bill could reduce federal budget deficits by between one-quarter percent and one-half percent of GDP in the decade after 2019.

That’s a step toward putting the federal budget on a more sustainable track. But it’s just a start.

"It’s a relatively modest contribution to reducing the long-term debt overhang," said Senate Budget Committee Chairman Kent Conrad, D-N.D., in an interview with C-SPAN.

Here’s what modest means. The so-called fiscal gap is estimated to be anywhere from 4% to 8% of GDP, Marron said. That’s a measure of how much spending would need to be permanently cut or taxes permanently raised if lawmakers were to put the federal budget on a more sustainable track long-term.

The Senate bill could move the needle by 0.5% of GDP in CBO’s best-case scenario.

While that doesn’t seem like a lot, it’s far from nothing, especially given how hard the goal of curbing health costs is. And it’s an indication of just how hard the fight will be next year when lawmakers are expected to consider proposals for how to address deficit reduction long-term. 

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Hungary’s central bank will probably cut the benchmark interest rate to the lowest in more than three years today to speed the country’s recovery from its worst recession in 18 years, which helps keep inflation in check.

The Magyar Nemzeti Bank in Budapest will lower the two-week deposit rate to 6.5 percent from 7 percent, reducing it for the fifth consecutive month, according to the forecast of 21 economists in a Bloomberg survey. One forecasts a cut to 6.75 percent. The decision will be announced at 2 p.m.

Policy makers shaved 2.5 percentage points off the key rate since July and said there is a room for further cuts as the economic slump blunts price pressures. Hungary was the first European Union country to get an International Monetary Fund-led bailout last year to avert a default during the credit crisis.

“The current market situation still provides sufficient room for the continuation of the easing cycle, without any major threat to financial stability,” Gyorgy Barta and Sandor Jobbagy, Budapest-based analysts at Intesa Sanpaolo SpA, said in a note to clients.

The forint fell to a record low against the euro in March. It has since been the sixth-best performer of the 26 emerging market currencies tracked by Bloomberg in the past six months, having gained 2.5 percent.

GDP Drops

Hungary’s economy contracted an annual 7.2 percent in the third quarter, worse than the 6.6 percent economists estimated, easing from a 7.5 percent slump in the second quarter. The central bank forecasts an economic contraction of 6.7 percent this year, the biggest decline since 1991.

The inflation rate fell to 4.7 percent in October from 4.9 percent in September as the recession muted the price-boosting effect of a July increase in the value-added tax. The central bank expects the rate to “significantly undershoot” its 3 percent target next year as demand falls instant payday loan.

“Cautious” interest rates cuts are “possible and desirable,” central bank Vice President Ferenc Karvalits told reporters on Nov. 16. Forward-rate agreements show investors expect the key rate to fall to 5.8 percent within the next six months.

Hungary’s interest rate cuts are trailing central banks such as the U.S. Federal Reserve and the European Central Bank as well as countries in the region including Poland and the Czech Republic because policy makers looked to defend the forint after investors sold off local assets during the credit crisis.

Poland, Czech Repulic

Poland will keep its benchmark rate at 3.5 percent on Nov. 25, according to all 18 analysts in a Bloomberg survey. The Czech central bank left its key rate at 1.25 percent on Nov. 5.

Hungary in October secured a 20 billion-euro ($29.6 billion) emergency loan from the International Monetary Fund, the EU and the World Bank and the central bank lifted the benchmark rate to 11.5 percent from 8.5 percent to avert a default.

Policy makers rolled back that increase by July, resuming rate cuts after a six-month pause as the forint strengthened from a record low against the euro in March as investor confidence began to recover after the government announced spending cuts.

Prime Minister Gordon Bajnai is cutting 1.3 trillion forint ($7.1 billion) in spending over two years to reduce the country’s financing need, in line with pledges to the IMF to limit the budget deficit. The cuts allow the central bank to pursue a “less restrictive” monetary policy, Finance Minister Peter Oszko said on Nov. 19.

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American Express Co said credit card spending increased in October from September in another sign that the worst of the financial crisis may have passed for the largest U.S. credit-card company, sending its shares up 1.5 percent to a 14-month high.

American Express card spending, adjusted for foreign exchange factors, was down just 1 percent in October compared with a year earlier, Chief Executive Kenneth Chenault said on Tuesday.

That showed improvement from a decline of a bit more than 5 percent in September and almost 10 percent in August.

“The trends in spending are encouraging, and there are signs that the recession may be approaching an end,” Chenault said at a financial services conference organized by Bank of America Merrill Lynch.

Spending volume rose in October to the highest level since last December. “We view this performance as positive,” Chenault said.

Chief Financial Officer Dan Henry in October said spending volumes had been stable since May and forecast spending could decline in the low single digits or be flat in the fourth quarter compared with a year earlier.

Total card spending fell 11 percent in the third quarter from a year earlier but showed an improvement against a 16 percent contraction in the second quarter low fee payday loans.

American Express was the fastest growing credit card company between 2003 and 2007 as it relaxed lending standards. But it paid a heavy price in the financial meltdown, and bad loans rose to record highs.

The company cut 11,000 jobs and reduced spending to save $2.5 billion, part of which it will invest now to grow. It also converted itself into a bank holding company to get access to government bailout funds, which it has repaid.

Analysts have said American Express, which relies on affluent and corporate customers more than its peers, is recovering faster from the recession as economic jitters ease.

American Express shares were up 59 cents, or 1.5 percent, to $39.64 in afternoon trading on the New York Stock Exchange, a 14-month high. The shares have more than doubled in price this year.

(Reporting by Juan Lagorio, Editing by Gerald E. McCormick and John Wallace)

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Toyota Motor withdrew from Formula One on Wednesday, leaving Japan without a team in motorsport’s premier series.

Company president Akio Toyoda apologized for the team’s failure to record a single race victory since joining F1 in 2002 despite an estimated annual budget of around $300 million.

“This was a difficult but ultimately unavoidable decision,” he told a news conference in Tokyo. “Since last year with the worsening economic climate, we have been struggling with the question of whether to continue in F1.

“We are pulling out of Formula One completely. I offer my deepest apologies to Toyota’s many fans for not being able to achieve the results we had targeted.”

The decision by the world’s largest carmaker to pull out of Formula One comes as the auto industry starts to stabilize following a sales crunch in the wake of the financial crisis.

Cologne-based Toyota’s departure as a team and engine supplier deals another major blow to the sport after Japan’s number two carmaker Honda quit the series last December.

It leaves Japan without a team in F1 and continues the drain of Japanese companies from motorsport, which has seen Subaru and Suzuki withdraw from the world rallying championship.

LEGAL RAMIFICATIONS?

Bike maker Kawasaki also scrapped its MotoGP team in the grip of a severe market downturn.

Japanese tiremaker Bridgestone announced on Monday they would not renew their supply contract with Formula One after the 2010 season.

In July, Toyota’s Fuji International Speedway circuit surrendered hosting rights for the Japanese Grand Prix in 2010 and beyond to reduce costs amid the global economic downturn.

The pull-out of Japanese companies from F1 began with Honda-backed Super Aguri, who left for financial reasons early last year.

Toyota’s exit leaves just three manufacturers in Formula One — Ferrari (FIAT), Mercedes and Renault.

It also opens the door for BMW-Sauber’s new Swiss owners to take their place as the 13th team on the grid.

Toyota signed the concorde agreement earlier this year committing themselves to F1 until at least 2012, so a pullout could also have legal ramifications. 

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Japan and Australia outlined competing visions for an East Asian trade bloc during a 16- nation summit in Thailand, offering plans that differ on what role the U.S. will play.

Australian Prime Minister Kevin Rudd discussed his idea for an “Asia-Pacific Community” that would include the U.S. and India. Japan’s Prime Minister Yukio Hatoyama, who took power last month, suggested an “East Asian Community” whose membership has yet to be determined, foreign ministry spokesman Kazuo Kodama said yesterday.

“Both Japan and Australia proposed bigger communities, which is a test for us,” Thai Prime Minister Abhisit Vejjajiva said yesterday in a weekly interview on a channel operated by state-controlled MCOT Pcl. The Association of Southeast Asian Nations “must be firmly integrated when we enter a bigger community.”

The proposals, which included few specifics, underscore different views within the region on U.S. power and economic dominance. The model of relying on Western demand for local goods and services “will no longer serve us as we move into the future,” said Abhisit, the meeting’s host.

“Japan wants to stay a major player and keep China from dominating,” said Carlyle A. Thayer, a politics professor at the University of New South Wales in Canberra. “Australia is worried about American staying power in the region.”

Asean countries account for about half of the world’s population and a quarter of global gross domestic product.

‘Closely Discuss’

Japan will “closely discuss and coordinate” with the U.S., Kodama said yesterday without elaborating. China is “positive and open” to the establishment of an “East Asian community,” Assistant Foreign Minister Hu Zhengyue said two days ago.

The U.S. signed a friendship accord with Asean in July to bolster ties with an area that contains sea lanes vital to world trade, as well as coal, oil and other commodities. The treaty is a prerequisite for joining the East Asia Summit, which consists of the 10-member Asean, China, Japan, South Korea, India, Australia and New Zealand, which also took place yesterday in Thailand.

Border Disputes

In a bilateral meeting on the sidelines of the summit, Indian Prime Minister Manmohan Singh and Chinese Premier Wen Jiabao vowed to improve relations and work on “issues” such as border disputes. The two countries need to build “better understanding and trust” to keep relations “robust and strong,” Singh said, according to a statement from India’s Ministry of External Affairs.

Asean also set up its first human rights commission at the weekend’s meeting, one without any authorization to discuss country-specific violations. Human rights groups have faulted Asean for its reluctance to criticize members such as Myanmar that are accused of silencing dissent.

Myanmar authorities may consider easing their stance on the detention of opposition leader Aung San Suu Kyi if she continues to have a “good attitude,” Kodama told reporters, citing comments by Myanmar Prime Minister Thein Sein.

Rice Reserves

China, Japan, South Korea and Asean said they will expedite the development of permanent emergency rice reserves to ensure food security in times of crisis and disasters, according to a joint statement. China pledged 300,000 tons of rice.

Australia and New Zealand’s free-trade agreement with a group of Southeast Asian nations will take effect next year, Australia said yesterday. The deal, originally signed in February at an earlier Asean meeting, is designed to eliminate or lower tariffs on products such as coffee, dairy, minerals, cars and vegetables in the next 12 years.

Southeast Asian countries are “on track” to eliminate tariffs on most goods traded within the region by the beginning of 2010, Asean said in a statement yesterday. The group aims to form a free-trade area by Jan. 1 that would remove tariffs on more than 87 percent of imports, part of its efforts to create an economic zone modeled after the EU, without a common currency, by 2015.

Regional Groups

The Japanese and Australian proposals would build on existing regional groupings. Those include the 10-member Asean, the 21-member Asia-Pacific Economic Cooperation bloc set to meet next month in Singapore and the 27-member Asean Regional Forum that U.S. Secretary of State Hillary Clinton attended in July.

Rudd’s Asia-Pacific Community would include the U.S., Japan, China, India, Indonesia and “the other states of our region,” he said in a speech last year. Its purpose would be to cooperate on economic, political and security matters and dispel notions that a conflict in Asia may be inevitable, he said at the time.

Hatoyama, who came to office Sept. 16, said in a speech at the United Nations a week later that he would strive to create an East Asian community similar to the European Union. The goal was seen as potentially excluding the U.S. after he published an opinion article in the New York Times in August arguing that “the era of U.S.-led globalism is coming to an end.”

Besides Thailand, which holds Asean’s rotating chairmanship, the group includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore and Vietnam. A wider East Asian free trade area may emerge before a new regional community is formed, Abhisit said yesterday.

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Homebuilders and real-estate agents were probably busier in September, and the index of leading indicators increased, adding to evidence the next U.S. expansion has begun, economists said before reports this week.

Construction started last month on 610,000 houses at an annual rate, the most since November, according to the median forecast of 53 economists surveyed by Bloomberg News before an Oct. 20 Commerce Department report. Sales of existing homes rose to a two-year high and the gauge of the economy’s future course advanced for a sixth month, other reports may show.

Housing is stabilizing as Americans take advantage of government programs, including credits for first-time buyers and efforts to lower borrowing costs, aimed at stemming the recession. Some Federal Reserve policy makers remain concerned the economy will relapse should the stimulus be removed too soon, signaling interest rates will remain low for months.

“The housing market is recovering from very depressed levels,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “We’re definitely emerging from recession, finding a bottom in some sectors, but the recovery is still uneven and it’s not particularly vigorous.”

Building permits, a sign of future activity, may have risen to a 590,000 pace, also the highest since November, the Commerce Department’s report on housing starts may show, according to the survey median.

In April, builders broke ground on new homes at a record- low 479,000 pace.

Leading Index

The index of leading economic indicators, due from the New York-based Conference Board on Oct. 22, may have risen 0.9 percent, according to the survey of economists. The gain was probably driven by the increase in building permits, a drop in claims for jobless benefits and an improvement in consumers’ outlooks, economists said.

A sixth consecutive gain in the leading index would mark the best performance since early 2004.

U.S. stocks have risen in recent weeks amid better-than- forecast earnings and signs the economy is improving. The Standard & Poor’s 500 Index closed at the highest level in a year on Oct. 15.

Google Inc., the world’s most popular Internet search engine, plans to resume hiring and acquisitions after the recovering economy helped third-quarter sales beat analysts’ estimates. Large customers stepped up spending on Google ads last quarter, a rebound from the first half of the year, Chief Financial Officer Patrick Pichette said.

‘Incredible Recession’

“We weathered what is an incredible recession,” Pichette said in an interview last week. “If you have all this behind you, the only outcome you should have as management is: ‘OK, let’s build now.’”

Fed policy makers at their September meeting decided to slow purchases of mortgage securities to avoid disrupting the housing market while extending the duration of the program by three months. In the minutes of the Sept. 22-23 meeting, which were released last week, they noted the housing market and retail sales got a boost from government incentives.

The Fed’s Beige Book report on regional economies, scheduled to be released on Oct. 21, will be used by policy makers to gauge the state of the housing market and the economy overall when they meet again in the first week of November.

An Oct. 23 report from the National Association of Realtors may show that sales of existing homes rose to a 5.35 million rate last month, according to the Bloomberg survey. That would be the highest level since August 2007.

Less Pessimistic

Tomorrow, a report may show builder confidence continued to climb this month. The National Association of Home Builders/Wells Fargo index probably rose to 20 from 19, economists surveyed said. It would be the seventh straight increase. While higher, readings less than 50 still signal that most respondents view conditions as poor.

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One steady bit of good economic news: Inflation remains near zero. So who would want to pay extra these days to add a dose of inflation protection in their portfolio?

Plenty of people. It turns out sales are hot for Treasury Inflation-Protected Securities, a common hedge against rising prices known by their acronym TIPS.

New money from investors and market gains have boosted total assets in mutual funds investing in TIPS nearly 36 percent so far this year, according to Morningstar Inc.

It’s part of a broader shift by many investors who have been scared away by stocks, despite the market’s hefty rebound from its March low. They’ve been piling into the greater safety of bonds, and TIPS — while not without risk — are about as safe as you can get.
The value of the underlying investment in TIPS rises with inflation, providing an additional layer of protection beyond what Treasury bonds offer.

Hardly anyone expects inflation to re-emerge as a big threat anytime soon, so TIPS aren’t necessarily the best short-term investment. But historically low interest rates and the federal government’s growing deficit are expected to drive prices higher, especially once the economy truly gets back on its feet and spending rebounds.

Here are some common questions and answers about TIPS:

How do TIPS work?

Introduced by the government in 1997, TIPS are a type of Treasury bond — investments that are super-safe, provided you believe the government will continue to make good on its credit obligations.

TIPS adjust their yield based on changes in the Consumer Price Index. The principal in TIPS adjusts every six months. The so-called "coupon" rises when inflation grows, and decreases in the less-likely instance of deflation. When the bond matures, you’re paid the adjusted principal or the original principal, whichever is greater. TIPS are sold in maturities of five, 10 and 20 years.

Investors in "nominal" Treasury bonds get a fixed rate of return if they hold the bonds until they mature. For example, 10-year Treasury notes are now yielding about 3.32 percent per year.

On the other hand, 10-year TIPS are yielding 1.55 percent, which doesn’t seem so good, until you consider what havoc inflation might wreak pay day loan. The difference — or "break-even rate" — between those two numbers is 1.77 percentage points. That suggests investors are expecting inflation will average 1.77 percent per year over the next 10 years. So if inflation exceeds that amount and erodes Treasuries’ current 3.32 percent yield, TIPS investors will be glad they paid for the protection.

Inflation had historically averaged 2 to 3 percent until falling to near zero when the market tanked last fall and deflation fears set in.

How have TIPS’ values held up lately?

Inflation and interest rate expectations are constantly changing, which is reflected in the prices traders are willing to pay for TIPS. Lately, TIPS have generally been seen as a good deal. Mutual funds investing in TIPS have returned an average of 8.63 percent so far this year, according to Morningstar. That puts TIPS in the middle of the performance pack among fixed-income fund categories.

How can I buy TIPS?

TIPS are available for purchase from the Treasury at http://www.treasurydirect.gov to avoid brokerage fees. If you’re not sure you can keep the bond until maturity and are nervous about managing your investment over time, you can buy into a mutual fund that focuses on TIPS, or an exchange-traded fund. Like TIPS mutual funds, TIPS ETFs hold baskets of TIPS with varying maturities but can be traded like a stock.

TIPS appear to carry little risk. Is that the case?

Any bond is subject to risk from rising interest rates, and TIPS are no exception. If the Fed boosts interest rates faster than inflation grows, or before inflation sets in, TIPS’ values will erode.

They also can be hit in a falling market, as happened last fall. Many institutional investors had to come up with cash to meet clients’ orders to pull out their money, forcing them to sell their most liquid investments. TIPS often fit the bill, and massive TIPs sales reduced prices. But as seen this year, they’ve bounced back.

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American International Group Inc is interviewing banks this week to manage a planned initial public offering of life insurance unit American Life Insurance Co, sources familiar with the matter said.

An IPO could fetch as much as $5 billion for Alico, depending on the size of the stake that is sold, the sources said. AIG has said it plans to list the company in New York.

About 10 banks, including UBS AG, Deutsche Bank AG, Citigroup Inc, Credit Suisse Group AG() and Goldman Sachs Group Inc, are expected to be interviewed for the job, the sources said on Tuesday.

Morgan Stanley is expected to get a lead role as it has been guaranteed such a position by the Federal Reserve Bank of New York for any IPO of AIG units, the sources said.

An IPO of Alico is expected only after the public offering of shares in another major AIG property, American International Assurance Co Ltd, which has been slated for early next year, one of the sources said.

Morgan Stanley and Deutsche Bank have been selected as global coordinators for the AIA offering.

AIG and all the banks declined to comment. The sources declined to be identified because the process is not public.

Alico, which was founded in 1921, sells life insurance and retirement products to 19 million customers through a distribution network that includes 40,000 agents easy payday loans. It operates in 54 countries but generates more than half of its revenue in Japan.

In July, another source told Reuters that AIG was in talks with MetLife Inc for a possible sale of Alico. The status of those talks could not be determined on Tuesday.

Late last month, AIG’s new chief executive, Robert Benmosche, said the company was still planning IPOs for Alico and AIA, preparing them from an eventual sale when the time was right.

The divestitures are part of the insurer’s efforts to repay U.S. taxpayers the roughly $80 billion it received as part of a larger federal rescue.

The company has agreed to give the U.S. government preferred stakes in Alico and AIA to reduce its debt by $25 billion.

Separately, Credit Suisse downgraded AIG to “underperform” from “neutral,” saying near-term sale of businesses would leave little to no value for common equity holders.

AIG’s shares were off $3.58, or 8.9 percent, at $36.47 during afternoon trading on the New York Stock Exchange.

(Reporting by Paritosh Bansal Editing by Gerald E. McCormick, Ted Kerr, Gary Hill)

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