Although the economists at Merrill Lynch & Co. believe that the Federal Open Market Committee (FOMC) should stop raising the federal funds rate target at its Jan. 31, 2006, meeting, they concede that's not likely. "New central bank chairmen at the Fed apparently like to start off by establishing their anti-inflation credentials from the very beginning," they observe.
Jan. 31 is Alan Greenspan's final FOMC meeting as Fed chairman, and the panel is expected to raise the target rate to 4.5% at that session. If confirmed by the U.S. Senate, as is widely expected, incoming Fed chairman Ben Bernanke would preside over the next scheduled FOMC meeting on Mar. 28, and if Merrill's economists are correct, the panel would take the target higher, probably to 4.75%.