Federal Reserve Seen Leaving Rates Steady
Federal Reserve policymakers meet Tuesday and Wednesday, but they are widely expected to keep their benchmark short-term interest rate unchanged at 1.75%.
A Reuters poll of 22 Treasury bond dealers found they were unanimous in expecting the Fed to stand pat. The central bank has maintained the so-called federal funds rate at a 40-year low of 1.75% since December, waiting for the economy to shift into a strong recovery.
Fed officials, who are expected to announce their stance on rates at 11:15 a.m. PDT Wednesday, have made clear that they see a pickup in business investment spending as crucial to ensure a solid, sustainable recovery. But business spending remains subdued, experts say.
“Capital investment is not going anywhere very fast,” Fed Chairman Alan Greenspan said of the economy earlier this month. “Our outlook at the Fed hasn’t really materially changed since January.”
What’s more, the stock market’s latest dive assures the Fed wouldn’t want to upset investors further by tightening credit, analysts said. Major stock indexes have fallen for five consecutive weeks, driving the Dow Jones industrial average to 9,253.79 on Friday, its lowest since October.
The Nasdaq composite, at 1,440.96 Friday, is within 18 points of its three-year closing low reached Sept. 21.
Most bond dealers don’t expect the Fed to consider raising rates until at least November, assuming the economy continues to improve.
Investors have a flood of economic data to wade through this week. Among the reports expected:
* Tuesday, the Conference Board issues its consumer confidence report for June, and the National Assn. of Realtors reports on home sales for May.
* Wednesday, the Commerce Department reports on factory orders during May.
* Thursday, the Commerce Department reports on its final estimate of first-quarter gross domestic product, which was 5.6% in its initial report.
* Friday, the Commerce Department reports on personal spending and personal income growth during May, and the University of Michigan issues its final June index of consumer sentiment.
