Will Fed Leave Rates Unchanged?; Many Analysts Think So, but Doubts Remain
Federal Reserve officials are widely expected to leave short-term interest rates unchanged when they meet Tuesday and Wednesday, but they are also likely to say they are still more concerned about rising inflation than they are about signs the economy is slowing.</br></br>The choice facing policymakers next week, Fed officials say, is between leaving their target for overnight interest rates unchanged or raising them by a quarter of a percentage point. A large majority of investors and analysts are betting rates will not change.</br></br>The situation was very different when the central bank's top policymaking group, the Federal Open Market Committee, last met in mid-May. Then, the choice was between raising the rate target by a quarter-point or a half-point. The policymakers opted for the latter, lifting it to 6.5 percent, a cumulative increase of 1.75 percentage points over a period of less than 11 months.</br></br>But the statement issued at the end of next week's meeting undoubtedly will contain the same language as the one released last month: "Against the background of its long-term goals of price stability and sustainable economic growth and of the information already available, the Committee believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future."</br></br>In other words, Fed officials see no reason yet to believe rates are necessarily high enough to slow the economy enough to keep inflation at bay. They could well decide at the following meeting, Aug. 22, to raise rates again if new data indicate a rebound in growth.