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Forecast: Federal Funds Rate 4% At Year End

The Federal Open Market Committee (FOMC), the 12-member Federal Reserve panel that sets U.S. short-term interest rates, is widely expected to raise the target for the influential federal funds rate by 25 basis points at end of a two-day meeting on June 30. It would be the ninth consecutive increase since June 2004 and increase the funds target to 3.25% from its current 3%.

Global Insight, a Waltham, Mass.-based economic forecasting firm, expects 25-basis-point increases to then increase at every FOMC meeting through November of this year, bringing the federal funds target to 4% by year end.

Global Insight had previously expected the year end rate to be 4.25% but has backed-off that figure as it has lowered its GDP growth forecast for 2005 to 3.4%.

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