The US Federal Reserve is expected to leave short-term interest rates unchanged when its policymaking Federal Open Market Committee meets Tuesday, August 20, according to the consensus of forecasts by Wall Street analysts.
Since the end of June 1999, the Fed has raised rates six times, taking its benchmark federal funds rate to 6.5 percent from 4.75 percent.
However at its most recent meeting, on June 28, it left, rates unchanged, following the half a percentage point rate hike in June.
The federal funds rate is the reference rate used by banks making overnight loans among themselves.
Lynn Reaser, an analyst with Bank of America Capital Management, said she expects the Fed to announce Tuesday that it is leaving both the federal funds rate and the discount rate on hold. However the committee will reiterate its concerns about the tight labor market and possible inflationary pressures as a result of continued strong US growth, she said.
Although July's figures for consumer inflation and employment did not point to accelerating inflation, inflation over the seven months to July has been at 4 percent, compared to only 2.4 percent in the same period of 1999.
However a large part of this year's inflation has been a result of higher oil prices, analysts say.
The bearish expectations on interest rates have been reflected in the bond market, where bond prices have risen. The average yield on the 10-year Treasury bond, moving inversely to price, was at 5.766 percent late Friday, from 6.029 percent at the end of July.
Traditionally, the Fed does not raise interest rates in the run-up to a presidential election.
Following Tuesday's meeting, the Fed committee has only one more meeting, on October 3, before the November 7 election. It then meets again on November 15. — (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
