Fed seen to hold rates steady
Friday, June 29, 2007
FEDERAL Reserve policymakers started a two-day meeting on Wednesday (yesterday, Brunei time) that is widely expected to lead to a decision to hold interest rates steady and a restatement of concerns about inflation.
The rate-setting Federal Open Market Committee began its fourth meeting of the year at about 2pm (2am Friday, Brunei time), a Fed official said. A statement outlining the committee's decision is due 15 minutes later.
The Fed is expected to hold its target for benchmark overnight borrowing costs steady at 5.25 per cent, a level reached a year ago, and repeat that its main concern is that inflation fails to moderate as expected.
Nevertheless, policymakers may nod to recent data that shows price pressures outside food and energy ebbing.
While the overall Consumer Price Index was up sharply in May, so-called core prices which exclude volatile food and energy prices rose just 0.1 per cent. The Fed's favourite inflation indicator, the core personal consumption expenditures price index, showed a 2 per cent year-on-year rise in April, the smallest in more than a year.
Even so, the Fed has suggested a tight labour market could spark inflation, and unemployment was unchanged at a low 4.5 per cent in May.
Financial markets will scour the central bank's statement for any clues about how officials see risks facing the economy evolving to try to gauge whether interest rates are more likely to rise or fall in the months ahead.
A report that showed surprisingly weak May durable goods orders and suggested some softness in business investment plans will be one factor officials will consider.
Reuters
The rate-setting Federal Open Market Committee began its fourth meeting of the year at about 2pm (2am Friday, Brunei time), a Fed official said. A statement outlining the committee's decision is due 15 minutes later.
The Fed is expected to hold its target for benchmark overnight borrowing costs steady at 5.25 per cent, a level reached a year ago, and repeat that its main concern is that inflation fails to moderate as expected.
Nevertheless, policymakers may nod to recent data that shows price pressures outside food and energy ebbing.
While the overall Consumer Price Index was up sharply in May, so-called core prices which exclude volatile food and energy prices rose just 0.1 per cent. The Fed's favourite inflation indicator, the core personal consumption expenditures price index, showed a 2 per cent year-on-year rise in April, the smallest in more than a year.
Even so, the Fed has suggested a tight labour market could spark inflation, and unemployment was unchanged at a low 4.5 per cent in May.
Financial markets will scour the central bank's statement for any clues about how officials see risks facing the economy evolving to try to gauge whether interest rates are more likely to rise or fall in the months ahead.
A report that showed surprisingly weak May durable goods orders and suggested some softness in business investment plans will be one factor officials will consider.
Reuters
Business Besides Oil
