>> there's a scenario, there's a forecast out there that would suggest that we may have to raise rates as soon as the end of this year or early next year. so that's not inconceivable to me. >> susie: this top federal reserve official says higher interest rates could be needed to fight inflation, and the worst thing right now would be to pump more money into the economy. my exclusive interview with charles plosser, president of the philadelphia federal reserve nk. >> tomour look at loca housing markets heads to miami, where the sun is shining again on real estate. >> reporter: i'm darren gersh at the capital. house republicans passed a budget calling for tax reform. i'll talk with the man who has

to make it work. >> tom: it's "nightly business report" for thursday, march 29. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: captioning sponsored by wpbt >> susie: good evening, everyone. the federal reserve could start raising interest rates by the end of this year. the president of the philadelphia federal reserve told me that in an exclusive interview earlier today. he said t's conceivable" the fed's key interest rate could move up to 1%.

tom, charles plosser is a powerful voice inside the fed, and he said the economy is improving. >> tom: susie, we are certainly seeing improvement in the job market. the government reported today the number of people filing for jobless claims for the first time fell to the lowest level in four years. the number last week dropped to 359,000, just the latest sign the job market continues getting stronger. >> susie: that's where i began myonveation with charles plosser. i ked him what he needs to see to feel that job market is healed. >> the job market will be healed when the flows and the jobs are flowing at a reasonable, steady pricement but you know, economies fluctuate and so they will be times when we feel like we're taking two steps forward an one step back. that's just the way economies work. >> so do you need to see job gains of five month, six months back-to-back before you feel comfortable that the economy is over the herd snell. >> well, i think certainly the longer we get 200,000

plus jobs reported a month, the better everyone's going to feechlt i think that will continue to bring the unemployment rate down a little bit. and it will build some momentum, improve incomes as more people are employed and that will help the economy. >> so when do you see the economy getting back to full employment? is it doable to get the unemployment rate down to 5est, 6%? >> i think it's going to take another few years, 2 to 3 years before we get to something below 6%. and maybe t may be 6% is the new full employment rate going rward. but it will take anoer couple of years. >> well, with the labor market still so fragile, does the fed need to keep pumping more money into the economy to keep the recovery on track? what everybody is calling q e3. >> well, it's unlikely given the nature of the unemployment problems we face, just pumping more liquidity into the economy at this point is probably not going to help us very much on the job front. that doesn't mean that it's

time to sort of pull back that liquidity. but i'm very doubtful that given the forecast and given where the economy seems to be today, what it looks like it is going to be doing in the future, ever more accommodation on the part of the fed is likely to be very beneficial. >> you have said adding more stimulus will take the economy down a very treacherous path. those are your words. what dow mean by that? >> the economy improves and this liquidity was pumped into the banking system is now sitting in the banking system. when all that money starts to flow out into the economy, it will generate inflation. and potentially lots of it. so the big heer ouralance sheet is, the more difficult the problem is at the exit to withdraw that liquidity in a timely fashion so that it doesn't generate high inflation. >> monetary policy is not free. it's just not-- there are costs to it and we have to be wary that we don't find ourselves in a position where those costs come back

and bite us if a very severe way. >> you talk about inflation, does the u.s. have an inflation problem? >> not yet. not now. the cost of where inflation is now, i'm a little less comfortable abt where it might go over the next two to three years. because if we don't get our policy right, and we are unable to exity from this very accommodated stance that we've taken, and we are still taking, we could really have a lot of inflation. we have to be careful about that. >> so are you saying that inflation is enough of a threat that the fed needs to raise interest rates sooner rather than later? >> the fed will need to raise interest rates when the economy says it's time to raise interest rates. it's to the going to be based on a calendar and shouldn't be based on the lendar. it defends-- depends on the economy, it depends on what inflation is doing, on what expectations are doing, it depends on what the economy is doing in general. >> but you have said that the fed might need to raise interest rates this year.

are you still sticking to that? >> well, i think there is a scenario. there is a forecast out there that would suggest that we may have to raise rates as soon as the end of this year or early next year. that's not inconceivable to me. >> well, rates right now are at 0%. >> right. >> so what kind of rate increases do you visualize that you would be comfortable with when the time comes? >> well, we have to remember that rates are at 0, but by any stretch of the imagination that is kind waf we call accomodative is so even if we move the rates to half a percent or 1%, by historical standards that's still a very accomodative monetary stance. i would be looking for us that as the economy gradually improves we gradually ease off the accelerator, take our foot off the accelerator and begin a gradual process of trying to get to normallization. >> do you see raising rates to let's say 1% by the end of this year. >> that depends so much on the course of the economy. but it is conceivable.

it's conceivable. >> coming >> susie: coming up later in the program, we'll have more of my exclusive interview with charles plosser. he talks about the impact of the weak housing market on the recovery. >> tom: not much movement on wall street today as the latest reading on growth failed to inspire buyers. the economy grew at an annual rate of 3% in the fourth quarter, its fastest pace since spring 2010. but many on wall street were hoping this final reading on gdp would be revised higher. still, the dow managed to eke out a gain, closing up 19 points. the nasdaq slipped nine and the s&p was off two. just a few hours ago,

republicans in the u.s. house of representatives overwhelmingly passed a budget aimed at slashing federal spending. the vote was 228 to 191, sending the budget to the senate, starting what will all but certainly be a long partisan battle. a key feature of the republican budget is tax reform. darren gersh reports. >> we've got to stop this notion that we can just keep taking more and more and more from families and businesses to spend us deeper into debt. >> reporter: you can't say house republicans are not ambitious. their budget calls for a sweeping overhaul of the federal government, beginning with a trillion dollars in reductions in medicare and medicaid spending over the coming decade. it reverses much of the president's proposed cuts in defense, adding back more than $200 billion. one of the most dramatic changes is in taxes. house republicans want to flatten the tax code, replacing the current six tax brackets

with two-- one at 10%, the other a top rate at 25%. the man who is supposed to turn that plan into theaw of the land is david camp, airm of the house ways and means committee. >> part of what we are trying to do is simplicity. 9 other piece that we are trying to accomplish is economic growth. and we think we can do that by lowering rates and closing loopholes to have a simpler and obviously more predictable code. >> so the president's critics would says that's quite a break for people who are very high income, 25%. >> they'll also lose some of the deductions that actually make their effective rate lower than the cuent published rate so this is mething that you have reallyook at wa, istheir fective rate and what is their published rate. and because there are so many exceptions, more than 5,000 in the last ten year as loan, that people are paying all kinds of different effective rates. so i think this will be more transparent it will be more predictable what your rate is going to be. >> but it sounds really popular, that we will get rid of exception and these

deduction but when you look at them they are things like the mortgage deduction, the deduction for employer health-care expenses. you haven't said which ones. have you going to get rid of popular things like the mortgage deduction. >> we don't need to get rid of tm all to get to 25. soart waf we want to do now is that a public process, obviously having these benchmarks in our budget is very important that send a signal the direction we want to go. and that is what a budget document is now we need to continue the hearing process and really continue to have a dialogue with the american people about where is the political consensus on this. do people really want as lower a rate as they can possibly get or are there some really tried and true important policy concerns that must remain in our tax code like the mortga deduction and others. >> mayor bloberg entered into that discussion today. and he said quote, any candidate without says we can cut taxes and balance the budget is either delusional or dissembling. so which is it?

>> well, we're lowering rates, and closing loopholes in a revenue neutral way so i don't know if that fits his description. >> but his point is that really w all the problems confronting the country, this is not a time to talk about cutting taxes, it's a time to start talking about how we're going pay for things. >> it's a time to talk about economic growth and jobs. and if we can have a simpler, fairer, flatter tax system, one that doesn't expire every year or two, i believe that we can get the kind of job growth and investment we need to get the country going again. >> one of the goals of your corporate tax reform will be to reduce the tax burden on companies from overseas investment. critics say look, that will encourage these companies to go overseas. you say that it will make our tax code more efficient. you can explain why? >> the u.s. is the only country left that doubles taxes, profits from their

own company doing business overseas. so we want to get a kind of international tax system that really mirrors what the rest of the world is doing. so that we're not disadvantaged. because right now we aren't competitive so we do need to make it easier not just temporarily but permanently for companies that are doing business around the world that ruchlt is-based to bring the pun back here and then have the jobs follow those investments. >> chairman dave camp, the chairman of the ways & means committee, thank u. >> thank as lotsing thanks for having me. >> susie: highway construction projects won't be shutting down this weekend. congress today passed a stop-gap three-month bill to keep federal highway and transit aid flowing. the move avoids a widespread shutdown of construction projects. the house acted first, followed by the senate, and the president has to sign off on the extension by saturday. that's the day the current highway spending authority expires.

as you said a few moments okay tom it was kind of a lackluster day on wall street but as we're coming up on the close of the first quarter of 2012, we see that all of the major averages are up by 10% or more. so that's pretty good. >> tom: yeah, maybe a bit of a breather here as the first quarter comes to a close tomorrow. muted market here today, susie. let's go ahead and take a look at tonight's market focus. and we saw thi med r we saw a mixed market close with stocks trying to pick themselves up into the closing bell. today's chart of the s&p 500 shows continued selling pressure this morning, but buyers came into the market in the last hour of trading. one sector not coming along for the late afternoon recovery was the financial sector. it was the biggest drag on the market. this financial sector exchange- traded fund fell almost 1%.

after the close tonight, the market focus was on research in motion. it makes the once-popular blackberry smart phones, but it has suffered a number of setbac in recent quarters, losi market share to the iphone and android devices. earnings were a penny shy of estimates, when excluding special charges. revenue fell considerably from last year as the number of blackberries it shipped continued falling. a year ago, this stock was over $50. it closed just below $14 tonight before its latest earnings disappointment, and acknowledgment both earnings and revenues will be under pressure this year. rimm's biggest competito ape, saw i shares slide re than 1% from an all-time high yesterday. according to "the wall street journal," an audit of apple's biggest supplier found several chinese work-place violations. the fair labor association looked at three foxconn plants in china that make iphones and

ipads, finding excessive working hours, safety and health issues. electronics retailer best buy certainly wasn't for shareholders today. the stock plummeted 7% as volume jumped six-fold. the big box retailer says its evolving its business model. it will close 50 stores this year and layoff 400 workers to cut costs. those decisions come after reporting stronger than expected earnings last quarter. part of its evolution is opening smaller stores and testing a new format called connected stores, concentrating on mobile phones, internet and other services. another retailer desperate for a makeover is sears holdings. it has already announced its effort to turn around business by closing stores and thinking smaller. now, talk of its posbly sellg the nds' end brand is back. shares have more than doubled this year, making it the best stock in the s&p 500. sears bought lands' end for

almost $2 billion ten years ago. analysts think it would sell for less than that if sears sells it. in a different kind of possible deal, biotech firm illumina continues seeing investor interest as drug maker roche raised its offer to $51 per share. illumina clod over $52 per share as the mart thks an even higher offer could be coming. illumina shares shot up in january when rumors about a buyout first surfaced. and we saw another big pop on a stock's first day of trading. it was mobile advertising firm millenial media, coming in with the best first day stock pop in ten months. shares came public at $13 and closed at $25 with a 92% gain. and that's tonight's "market focus."

>> susie: we return now to my conversation with philly fed president charles plosser. he said there's evidence the housing market and home prices are beginning to stabilize. i asked him if the u.s. economy can heal without a full recovery in housing. >> i think that's a little too simplistic way to look at the kmechlt i think that the housing market will have to impve, but the housing market is not as big a share of the economy as it was in 2007. so yes, we want the housing market to improve. and yes, if we get it top improve the economy will do better. but i'm not entirely convinced that it's the linchpin to everything that makes the economy recover. >> susie: account fed do anything to repair housing? >> i think some people have come to expect that the fed has all these tools and we can just solve the housing market. we can solve the labor market. we can solve the automobile

problems. monery policy is not a very useful tool for solving a lot of these problems. we're a very blunt instrument. >> i'm sure you hear this all the time that people complain that it's so difficult to get a mortgage or refinance their home even if they have a good credit cord. isn't there anything that the fed can do to encourage banks to lend more? >> we don't want banks making the type of loans they made in 2005 and 2006 because that's what got the banks in trouble. so supervisors are naturally going to say we don't want you to doing that again. so trying to find where the right line isndmaki good loans available. there's plenty of liquidity out there to make the loan. but we want the banks makin making-- sound loans. >> susie: looking at the markets, the fed's actions seem to be telling investors that stocks are the way to go. is that a fair conclusion for investors to make? >> we've been encouraging people to, as we say, move out the risk curve. take on more risk because we've lowered the cost of

treasuries and faced securities, lowered the yield on those, encouraged people to take risk. one way people can take ris somethg to oiously going into stocks, bonds or other types of riskier assets. we need to steer away from thinking about policies in terms of stimulating a market. we're trying to allow the economy to function better and support that, and let investors decide where to put their money. >> well, as investors tray to decide what to do, if you are worried about inflation t would appear that bonds are not the place to be. what do you think? >> it's unlikely, i think, that we can drive lonterm rates down further towards 0. it would be very difficult to do. even if we wanted to. so the prospects for interest rates over a longer time horizon is probably up, not down. >> susie: and as interest rates go up, bond price goes down. >> right. >> susie: so that would make the case of maybe stocks are the better way to go. >> perhaps. i don't make recommendations.

>> tom: as plosser said, the housing market still has a ways to go until it's finally healed. we've been taking the temperature of local housing markets across the country, and tonight, we head to miami. ven years ago, it was on the leading edge of the nation's housing collapse. today, demand is up, but supplies have dwindled. the curtains may be parting for one of the hardest hit areas of the housing collapse. looking out over miami, you see a picture that worries real estate experts-- not enough places for sale. >> in 2011, in miami-dade county, we sold more homes and condos than we've ever sold in history. we had an enormous amount of sales. of course, we were selling them at some pretty bargain prices, so that certainly helped. >> tom: in the brickell neighborhood just south of downtown, more than 10,000 new condominiums were built during the boom. more than nine out of every ten now have someone calling them home. often, that's someone renting their place from an investor. with demand on the upswing, inventories have plummeted.

a year ago, almost 25,000 properties were for sale. in february, that had fallen to fewer than 14,000. one of those for sale is this marquee waterfront condo with multi-million-dollar views of downtown miami and biscayne bay. it's unfinished, with an asking price of more than $7.5 million, cleay waabove the average price of aiamiondowhicis around $270,000. luxury properties and high-end prices get a lot of attention in miami. but it's places like this, apartment 202 here at the water club in miami beach, that's closer to a median price of a condominium in miami these days. the asking price is $229,000. edward wang is the buyer of unit 202. >> we've seen a lot of properties on miami beach that look real older, like the art deco style. a lot of them have older finishes, older designs. we like this one because almost everything is brand new. th's wt we like abt it. >> reporter: wang is from toronto, and his offer is helped

by the strength of the canadian dollar against the u.s. dollar. but even though he plans on putting 50% down, he found it tough finding an american bank to lend him the rest. not all miami neighborhoods have seen action pick up, especially those still suffering from foreclosures and owners owing more than their homes are worth. real estate expert shari olefson sees what she calls micro-market dynamics in south florida real estate. >> there's definitely a bifurcatioat tt level, in terms of the property type and the values. the higher end properties are doing very well. >> tom: just after we spoke with edward, the buyer from toronto, he learned his offer for the condo was accepted. tomorrow, our housing series goes to houston, which was insulated from the worst of the housing bust. >> susie: when the bottom fell out of the housing market a few years ago, uncle sam stepped in to offer prospective homeowners a big reason to buy, a hefty tax incentive. but for some, it's created a tax nightmare.

kevin cormally explainin tonight's "tax tips." >> did you, or someone you know, sell a house in 2011 that was purchased under the government's new home buyer tax-credit law? if so, it may be payback time. part of the deal for earning a $7,500 credit in 2008-- or the $6,500 or $8,000 credit for 2009 or 2010 purchases-- was that you stay in the house for at least three years. congress didn't want to encourage more of the flipping that helped create the housing crisis in the first place. the stick to go along with that valuable carrot was a demand that those who sold within three years repay e credit in full with the tax return of the year ofhe sale. that means some 2011 sellers could be facing a big tax bill. but, there's a big but. although it's not widely known, you're never required to pay back more than the profit you made on the sale of the home. so, if you sold for a loss, no payback is required. when figuring whether you had a gain, you must reduce your tax basis by the amount of the homebuyer credit you received.

if you bought for $150,000 and got an $8,000 credit, your basis is just $142,000. if you got more than that for the sale, after l your expenses, you have a profit, so part of the credit has to be repaid. you figure just how much on form 5405. be careful when you complete that form to make sure you don't repay more than you have to. i'm kevin mccormally. >> susie: kevin's also taking your tax questions online, nbr.com/tax tips. >> tom: here's what we're watching for tomorrow: do high gas prices have consumers worried? we'll see with the final reading on march consumer seiment. and wall street puts the wraps on the first quarter. we talk with sam stovall of standard and poor's. >> susie: and finally, millions of americans are dreaming of a big payday tomorrow, hoping to hit the mega millions massive jackpot. after 18 straight drawings with

no winner, the jackpot has climbed to over $500 million. no wonder people in 42 states, washington, d.c., and the u.s. virgin islands are lining up to buy tickets. and those tickets are selling at a rate of a miion ticketan hour. but tom, the odds of winning are estimated at one in 176 million. >> i have better odds hitting a hole one and i don't even play golf. >> susie: don't give up your day job. >> tom: not yet. >> susie: that's "nightly business report" for thursday, march 29. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org