Expect No Interest Rate Hike From The Fed

By John S. McClenahen With inflation not a worry and manufacturing and the rest of the U.S. economy continuing to show signs of a slow and uneven recovery from recession, the Federal Open Market Committee (FOMC) is not expected to raise short-term interests when it meets this week. The influential federal funds rate has been at a historically low 1.25% since Nov. 6, 2002. That's not likely to change until at least early this summer, private economists suggest. For example, Waltham, Mass.-based Global Insight Inc.'s current economic forecast assumes that Chairman Alan Greenspan and his FOMC colleagues won't start raising interest rates until their two-day meeting in late June. That anticipated 25-basis-point increase in the federal funds rate to 1.5% will be followed by a 50-basis-point increase to 2% on Aug. 12 and a 25-basis-point increase to 2.25% on Sept. 16, the forecasting firm's economists expect. By yearend, they expect the federal funds rate to be at 2.5%, more than a full percentage point higher than it is now.

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