Short-Term U.S. Interest Rates Unlikely To Change

By John S. McClenahen In Washington, D.C., at about 2:15 p.m. on June 26, the Federal Open Market Committee (FOMC) will likely announce a non-event. The panel, whose buy and sell actions effectively set U.S. short-term interest rates, is expected to leave the target for the influential federal funds rate unchanged at 1.75%. "There seems to be very little doubt in the markets about what Fed officials will do with the federal funds rate and the official balance-of-risks stance at the upcoming . . . FOMC meeting," notes Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. "The two appear to be left unchanged at 1.75% and neutral, respectively." With the outcome in little doubt, the only real uncertainty going into the FOMC's two-day meeting on June 25 and 26 is the wording of the statement announcing the panel's decision, says Harris. "Most likely, we believe the Fed will try to strike a balance by talking up the [U.S. economic] recovery without suggesting that tightening [of the U.S. money supply] is imminent."

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