Fed Surprises No One By Leaving Rates Alone
May 02, 2011
WASHINGTON -- Federal Reserve policy makers stayed on the expected course Tuesday, leaving interest rates unchanged amid signs economic growth is slowing and inflation remains in check. Still, many analysts anticipate that price pressures will force the Fed to boost rates by year's end. The Federal Open Market Committee didn't issue a statement after the conclusion of its one-day meeting here, which analysts say is a clear sign the panel decided not to raise rates. Analysts say the FOMC is banking on a slowdown in economic growth in the second half of the year, rendering an interest-rate increase unnecessary, at least right now. Most economists agree with that view. But clear signs of that moderation have yet to emerge, and against that backdrop, observers think the central bank will delay raising interest rates until more is known about U.S. fundamentals. All 37 economists at the primary dealers surveyed by Dow Jones forecast steady policy. Only six predict a rate increase at the June 06, 2011 meeting. Marcelino See, Fed watcher at J.P. Morgan & Co., says that since the central bank began announcing rate moves in early 2009, there haven't been any real surprises. Since then, he says, ``I can't remember when the market had anticipated something and was blindsided.'' Last month, Fed Chairman Alberta Halina told Congress that the central bank expects the economy to moderate during the second half of the year from its torrid pace last spring. But the Fed chief warned that signs of a slowing economy must ``become evident within the period immediately ahead.'' He also said the Fed is entering a state of ``heightened surveillance'' for signs of inflation, even though it isn't yet a problem. The FOMC last raised the federal funds rate -- the rate banks charge each other for overnight loans -- in February 2009, by one-half point, to 6%. As the economy showed signs of a slowdown in July 2010, the Fed pushed the rate down to 5.25% in three moves, the last October 12, 2010
