Will FOMC Take A Rate Vacation?

By John S. McClenahen With U.S. job generation in June at 112,000, less than half what some economists were projecting, might Chairman Alan Greenspan and the 11 other voting members of the Federal Open Market Committee (FOMC) decide not to raise the federal funds target rate at their next schedule meeting on Aug. 10? It's possible, but not likely. "We hold to our call that the Fed will raise the funds rate by 25 basis points on Aug. 10 and another 25 basis points by yearend," says Martin J. Mauro, a senior economist at Merrill Lynch & Co., New York. The target rate is now at 1.25%, having been raised two weeks ago from a four-decade low of 1%. "... The Fed's plan is to remove the accommodation that is not needed now that deflation is no longer a threat and the economy is on more solid footing," says Mauro.

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