Using the national unemployment rate and rate of capacity utilization in U.S. manufacturing as benchmarks, the economists at Merrill Lynch & Co., New York, believe the Federal Open Market Committee (FOMC) will raise the federal funds target rate at the end of a two-day meeting on March 27 and 28 and then put it on hold for a while.
Merrill figures the U.S. unemployment rate will bottom out at its current level, 4.7%, and that factory capacity utilization is close to peaking out at 80.1%. "Based on what we have seen in the past, it would stand to reason that March is it for the cycle," says the securities firm.
The FOMC is expected to raise the federal funds target rate, the interest banks charge each other on overnight loans, by 25 basis points to 4.75% when its meets at the end of next month.
