Newspaper article THE JOURNAL RECORD

Fed Not Expected to Change Level of Nation's Interest Rates

Newspaper article THE JOURNAL RECORD

Fed Not Expected to Change Level of Nation's Interest Rates

Article excerpt

WASHINGTON (Bloomberg) -- U.S. Federal Reserve policy-makers probably will leave interest rates unchanged today, as they have for almost 17 months, amid little sign of accelerating inflation.

Since policy-makers last met on July 1, economic growth has cooled, inflation has stayed benign and the Standard & Poor's 500 Index has fallen 6.5 percent. In addition, the dampening effects of economic crises in Asia and Russia may intensify.

The key question for the future course of monetary policy is what happens with consumer spending, which makes up two-thirds of the economy. With unemployment at 4.5 percent, jobs are readily available and incomes are rising.

"Because consumer spending is running so far ahead of gains in spendable income, a sharp slowdown is coming, but it is not here yet," said Steven Wood, director of financial markets research at BancAmerica Robertson Stephens in San Francisco.

Fed watchers at all 32 firms that deal directly with the central bank's securities trading desk expect Chairman Alan Greenspan and his colleagues to hold interest rates steady this week. The overnight bank lending rate has been at 5.50 percent since March 1997.

"Alan Greenspan should just sit and let monetary policy stay as is," said Alan Day, an economist at Stratevest Group in Burlington, Vt., which manages $2.1 billion in stocks and bonds.

"U.S. inflation is very well-behaved."

The consumer price index is on track to match last year's pace, the slowest since 1986. For the first six months of the year, the CPI rose at a 1.4 percent annual rate, down from a 1.5 percent pace in the same period a year earlier.

That has helped spur consumer spending, which increased at a 5.8 percent annual rate last quarter, close to the 6.1 percent pace in the first three months of the year. So far this quarter, spending is off to a robust start. …

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