Further Cutting of Interest Rates in Doubt

Federal Reserve officials meet this week to consider cutting U.S. interest rates to levels not seen since 1958 -- when Elvis Presley entered the Army -- but they seem likely to hold off in hopes that war jitters will end soon.

Recent economic news has been bleak, but public comments from many policymakers indicate that they see unease caused by the long run-up to a potential U.S. military strike on Iraq as the main culprit.

Though some analysts think the central bank will be unhappy enough with the data to trim rates Tuesday, most think policymakers will wait to see whether a U.S. strike on Iraq helps calm consumers and businesses.

“I think the 18th of March is probably a poor day to make the decision to change interest rates,” said Doug Lee of Economics From Washington, which helps money managers understand how policy decisions affect markets.

If the Fed decides to hold rates steady and events in the Middle East unfold poorly from a U.S. perspective, analysts say, Fed Chairman Alan Greenspan may well be at the ready with his finger on the interest-rate trigger.

But most are betting he won’t need to pull it.

Of the 22 major Wall Street firms that deal directly with the Fed in the markets, a slim majority, 13, told Reuters that rates at their current four-decade low should prove sufficient to foster a recovery.

The rate-cutting suspense comes after a slew of recent data, including the shocking loss of 308,000 jobs in February and a fall in retail sales, showed an economy at a near-standstill.

The Fed has cut the benchmark overnight rate a dozen times since early 2001, taking it to just 1.25% in an effort to breathe life into an economy suffering a hangover from the late-1990s stocks and investment-spending boom.

With interest rates so close to zero, the Fed has had to give some thought to what it might need to do if further rate cuts fail to jolt the economy.

Some economists said the Fed probably would use its post-meeting statement Tuesday to indicate a readiness to cut rates if needed before its next scheduled meeting May 6 by saying it was monitoring developments closely -- language used in statements that preceded two of the three so-called intermeeting cuts in 2001.