U.S. Interest Rate Outlook Mixed: Steady Or Rising

Steady, says Merrill Lynch & Co. Inc. "We expect the Fed to hold a steady course," states chief economist Bruce Steinberg. And Merrill Lynch foresees the prime rate holding at 7.75% through the fourth quarter of 1999. In contrast, David A. Wyss, chief economist of Standard & Poor's DRI, expects the Federal Reserve to raise rates in about six months. "We are assuming a rate hike this August, but that time will obviously depend on incoming monthly data, and could easily be delayed," Wyss says. Indeed, DRI sees the prime rate moving to 7.87% in this year's third calendar quarter and to 8% in the fourth.