Fed Policy-Makers Discuss Rates Behind Closed Doors

Federal Reserve policy-makers met in private Tuesday to discuss the course of credit policy over the next several weeks and whether interest rates can move lower without refueling inflation.

The decisions made by the Federal Open Market Committee at its closed meeting will not be made public until Oct. 6, a few days after the next scheduled meeting. But private economists expect the policy-makers to decide to hold steady on interest rates for the time being.

The Fed slightly eased its grip on credit earlier this summer in the face of economic weakness, bringing the federal funds rate, the interest banks charge each other for overnight loans, down by about three-quarters of a percentage point. The federal funds rate currently is averaging just slightly below 9%.

Recent data suggests that growth remains surprisingly strong while gains in the battle against inflation have been modest. Most economists expect the Fed to be cautious about further interest rate moves until it is clear inflation has been subdued.

Watching for Clues

At best, Fed policy-makers could decide to push the federal funds rate down by a quarter of a percentage point over the next several weeks, economists said.

Financial markets, though, will be watching Fed open market operations over the next several days for clues to any changes in central bank policy.

The FOMC consists of five of the 12 Federal Reserve Bank presidents and the seven board members, although one seat currently is vacant. The decisions made at the July 5 and 6 session will be made public on Friday.