Fed Expected to Hold Rates Steady Amid Slowing

Federal Reserve officials are expected to keep interest rate policy steady this week, content to watch the gradual slowing in the economy but still wary of inflation’s potential, analysts say. Amid signs the hard-charging expansion has begun to brake, there is scant reason for the Federal Open Market Committee to decide when it meets Wednesday to resume a rate-rising campaign that has been on hold since May. But equally, the U.S. central bank probably will keep its guard up against inflation as it assesses whether higher energy prices are working their way onto store shelves and whether wage rises are threatening to set off a wage-price spiral. The outcome of policymakers’ deliberations, analysts say, will be no change in key rates and a repetition of the warning that risks remain tilted toward inflation rather than a sharp fall-off in growth. That will keep the federal funds overnight bank lending rate that determines credit costs in the world’s largest economy at 6.5%, the same level it has held since an unusually large half-percentage point rise in May. After this week’s meeting, Fed policymakers have just one more session in 2000, on Dec. 19.