Fed expected to raise interest rates

Airencracken · 05-03-2005, 12:05 PM

http://www.latimes.com/business/la-0...home-headlines

Fed Expected to Raise Interest Rates

By Jesus Sanchez, Times Staff Writer

The Federal Reserve is widely expected to nudge interest rates higher today and possibly drop hints about the pace of future rate hikes in the wake of slowing economic growth and rising prices.

Wall Street stocks were trading in a narrow range this morning as investors awaited the Fed's announcement, expected shortly after 11 a.m. PDT.

Most economists expect the Fed's Federal Open Market Committee, headed by Fed Chairman Alan Greenspan, to raise its benchmark federal funds rate — what banks charge each other for short term loans — to 3% from 2.75%. It would be the eight consecutive quarter-point increase since last summer.

Changes in the federal funds rate eventually reverberate throughout the economy because the rate influences everything from credit card rates to home equity loans and adjustable rate mortgages.

While higher rates will make borrowing money more expensive, it also means that consumers can expect to earn more from their savings accounts.

Along with changes to the federal funds rate, investors and economists will scour today's statement by the committee for clues as to whether the Fed might become more cautious about future increases.

The Fed has telegraphed its intention to raise rates "at a measured pace," meaning in small increments, as the economy continues to recover and demand for goods and services increases. The central bank has also felt free to tinker with rates because increases in wages and prices have remained relatively modest.

Since the last committee meeting in late March, however, economic activity has slowed and upward pressure on prices has increased, according to recent statistics, including the government's report on the gross domestic product during the first quarter.

Most analysts say the economy is strong enough to continue expanding on its own without the help of rock-bottom lending rates. However, raising rates too quickly could weaken consumer spending — the largest driver of economic growth — and undermine the housing market, which has been a huge source of economic growth in places like California.

Under Greenspan's leadership, the Fed steadily cut its rate from 6.5% in 2000 to 1% by last June to prop up an economy hit by tumbling stock prices, the 2001 terrorist attacks, corporate scandals and the Iraq war
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Hmmmmm.

05-03-2005, 12:05 PM	#1
Airencracken Admiral Join Date: Jul 2003 Location: California Posts: 6,681	Fed expected to raise interest rates http://www.latimes.com/business/la-0...home-headlines Fed Expected to Raise Interest Rates By Jesus Sanchez, Times Staff Writer The Federal Reserve is widely expected to nudge interest rates higher today and possibly drop hints about the pace of future rate hikes in the wake of slowing economic growth and rising prices. Wall Street stocks were trading in a narrow range this morning as investors awaited the Fed's announcement, expected shortly after 11 a.m. PDT. Most economists expect the Fed's Federal Open Market Committee, headed by Fed Chairman Alan Greenspan, to raise its benchmark federal funds rate — what banks charge each other for short term loans — to 3% from 2.75%. It would be the eight consecutive quarter-point increase since last summer. Changes in the federal funds rate eventually reverberate throughout the economy because the rate influences everything from credit card rates to home equity loans and adjustable rate mortgages. While higher rates will make borrowing money more expensive, it also means that consumers can expect to earn more from their savings accounts. Along with changes to the federal funds rate, investors and economists will scour today's statement by the committee for clues as to whether the Fed might become more cautious about future increases. The Fed has telegraphed its intention to raise rates "at a measured pace," meaning in small increments, as the economy continues to recover and demand for goods and services increases. The central bank has also felt free to tinker with rates because increases in wages and prices have remained relatively modest. Since the last committee meeting in late March, however, economic activity has slowed and upward pressure on prices has increased, according to recent statistics, including the government's report on the gross domestic product during the first quarter. Most analysts say the economy is strong enough to continue expanding on its own without the help of rock-bottom lending rates. However, raising rates too quickly could weaken consumer spending — the largest driver of economic growth — and undermine the housing market, which has been a huge source of economic growth in places like California. Under Greenspan's leadership, the Fed steadily cut its rate from 6.5% in 2000 to 1% by last June to prop up an economy hit by tumbling stock prices, the 2001 terrorist attacks, corporate scandals and the Iraq war -------------------------------------------------------------------------- Hmmmmm. __________________ "I remember my first orgasm, I just wish someone was there to share it with me..."11-05-2003 05:33 AM - Topane They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety. - Benjamin Franklin Religion is the sigh of the oppressed creature, the heart of a heartless world, & the soul of soulless conditions. It is the opiate of the masses. - Karl Marx Hell is other people - Jean-Paul Sartre

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