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Forecast: FOMC Begins Raising Interest Rates In December

By John S. McClenahen With the U.S. economy likely to remain weak at least until midyear, it may seem premature to be anticipating higher short-term interest rates. But that's exactly what the economists at Global Insight Inc., Waltham, Mass., are doing. They expect the U.S. economy will be growing at a 4% annual rate during the second half of 2003 and figure that the 12-member Federal Open Market Committee, which sets monetary policy, will boost the target for the influential federal funds rate to 1.75% at its Dec. 9 meeting. The funds target currently is 1.25%, a 40-year low. By the summer of next year, the forecasting firm's economists predict, the federal funds target will be 2.5%.

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