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To: Les H who wrote (15359)	12/7/2003 1:28:28 PM
From: biometricgngboy	Respond to of 306849

US Fed to hold rates steady, no hike seen for months Reuters, 12.07.03, 11:22 AM ET By Tim Ahmann WASHINGTON, Dec 7 (Reuters) - Federal Reserve officials are set to hold interest rates steady at 45-year lows on Tuesday but analysts disagree on whether the central bank will use this meeting to ditch a controversial commitment to holding rates down. Whatever the Fed chooses to say following its policy gathering, economists said the underlying message will remain the same: any rate hike is still several months away. Fed officials have suggested as much recently, saying in numerous speeches that inflation was unlikely to flare up when the economy was far from employing all readily available workers and swathes of industry lie idle. While the jobless rate dropped to an eight-month low of 5.9 percent last month, the level of employment is still 2.4 million below where it stood before the economy sank into recession in 2001. And U.S. industries are not using a quarter of their productive capacity. Indeed, some policymakers have said such circumstances keep alive the risk already low inflation could move lower. "You'd have to argue you're not talking about any rate increase until the second half of next year," said longtime Fed watcher David Jones, chairman of soon-to-open Investors' Security Trust Co. in Fort Myers, Fla. Fed officials will announce their rate decision and sketch out their view of the outlook around 2:15 p.m. (1915 GMT) on Tuesday, following their last policy meeting of the year. After each of the last three gatherings, the Fed has said it expected to keep rates low for "a considerable period," a vague commitment but one surprisingly explicit for a central bank historically loath to tie its hands in any way. Minutes of a September Fed gathering showed some officials were uncomfortable with language that appeared to link policy to the passage of time rather than the economy's evolution. Many analysts believe a decision to jettison the pledge would simply reflect this intellectual discomfort and would not indicate officials felt it would soon be time to boost borrowing costs from their current 1958 low of 1 percent. "It's going to be a lively debate," said Doug Lee, head of consulting firm Economics from Washington. "Different members have indicated they are on different sides of the issue, so I think it could go either way." NO CLEAR CONSENSUS Most of the 22 large Wall Street firms that deal directly with the Fed in the markets expect rates to be on hold until at least mid-2004, according to a Reuters poll conducted on Friday. None expect a rate move on Tuesday. However, 10 believed the low-rate pledge would go, two others called such a decision possible and two said it would likely be dumped at the next meeting in January. Most economists who anticipate the vow's elimination think Fed Chairman Alan Greenspan will find some other way to convey a message of policy patience. "They need to back away from it without scaring people into thinking that they are going to do something sometime soon," Lee said. Few Fed watchers think the Fed is ready to abandon a warning over the risk of slowing inflation. Of the 22 bond firms surveyed on Friday, 19 said the Fed would repeat on Tuesday its view that the risk of disinflation continued to dominate its thinking on policy. "You're still sitting here with a 1 percent fed funds rate target and a recovery that has to be viewed as at least somewhat fragile," Jones said. forbes.com