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Politics : THE VAST RIGHT WING CONSPIRACY -- Ignore unavailable to you. Want to Upgrade?

To: calgal who wrote (5812)	1/28/2004 5:53:03 PM
From: calgal	Respond to of 6358

Fed Keeps Rates Steady but Signals Willingness to Move Wednesday, January 28, 2004 WASHINGTON — Federal Reserve (search) officials opted Wednesday to hold interest rates at 1958 lows -- but changed the wording of their statement to say that they could "be patient" before lifting borrowing costs. That's different from previous statements when the Fed said that it had leeway to keep short-term rates low for a "considerable period" -- a phrase that it had been using since August. The Fed said that since its last meeting in December, economic reports suggest that the economy is "expanding briskly." It added that "although new hiring remains subdued, other indicators suggest an improvement in the labor market." The unanimous decision by Fed Chairman Alan Greenspan (search) and the rate-setting Federal Open Market Committee (search) keeps the trendsetting federal funds rate (search) for overnight loans between banks at 1 percent. The funds rate, the interest that banks charge each other on overnight loans, is the Fed's primary tool for influencing the economy. It is at a 45-year low after the Fed cut rates 13 times since early 2001 in an effort to foster a vigorous expansion. Markets were surprised by the wording change, which sent the dollar higher and weighed on Treasury bond prices. "I think this is another step toward the Fed eventually raising interest rates sometime later this year," said Gary Thayer, chief economist, A.G. Edwards & Sons in St. Louis. "In December, the Fed changed its weighting of inflation risks and now in January it removed the phrase that it would keep policy accommodative for a 'considerable period.' It may just be a matter of linguistics, but the market is taking it as a sign that a change in policy is closer now than it appeared to be before the meeting," he added. Most recent economic data have been positive, though not universally so. The economy expanded at a booming 8.2 percent annual rate in last year's third quarter and analysts expect the government will on Friday announce it grew at a solid 4.8 percent clip in the fourth quarter. But with presidential elections ahead in November, meager job creation since the 2001 recession has come under a harsh spotlight. Some 2.3 million jobs have been shed since President Bush took office in January 2001. Bush's economic team, including Treasury Secretary John Snow (search), have been at pains to note that employment growth typically lags in the early stages of recovery. But contenders for the Democratic presidential nomination say job insecurity is a gauge of the administration's inadequate economic policies. A disappointing 1,000 new jobs were created in December, according to government data. The two-day meeting was one of two longer sessions the policy panel holds each year to help Greenspan prepare for his semi-annual testimony on the economy before Congress. His appearances before House of Representatives and Senate lawmakers on Feb. 11-12 will allow him to refine his views on the economy's health and to parry lawmakers' questions about why a more full-fledged recovery has not set in. Despite the laggard job market, there are other signs pointing to brightening economic times, including rising consumer and business confidence and robust construction and home sales -- fueled partly by low mortgage and other borrowing costs. The stock market has been signaling an economic improvement as well. The Standard & Poor's 500 (search) stock market index is up more than 7 percent since the last Fed meeting in early December. Eventually, borrowing costs are sure to rise to keep inflation from rearing up as the pace of activity quickens. However, analysts are divided over whether the Fed will start lifting them this year or whether it could ride out the whole of 2004 with rates at current bargain-basement levels. Greenspan has shed little light on the topic, but noted in Berlin earlier this month that inflation was "quiescent" and that there was no sign of inflation from a declining dollar. Reuters and the Associated Press contributed to this report. URL:http://www.foxnews.com/story/0,2933,109751,00.html