Increase in Federal Reserve Rates Likely
When the Federal Reserve meets on Tuesday, Aug. 24, financial analysts expect Chairman Alan Greenspan and his colleagues to continue a process they started at the end of June by raising short-term interest rates another quarter-percentage point.
Even though a rate increase looks likely, some analysts said that recent economic news, particularly continued reports of low inflation, suggest that the Fed might remain on hold and wait for more information about the economy's course.
If rates are raised, many Fed watchers think the central bankers would be unlikely to follow with further increases at their October or December meetings. Nevertheless, a smaller number of analysts believe economic growth and potentially inflationary wage gains may lead to additional rate increases before the year is out.
The difficulty is that neither Greenspan nor any of the other 16 officials with a voice in the interest rate decision are certain what course the economy will take in coming months. As always, they have to set a target for short-term rates on the basis of highly uncertain economic forecasts.