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To: macavity who wrote (52200)	8/10/2004 6:29:59 AM
From: elmatador	Respond to of 74559

I jumped off NZD last night. Still holding Yen. Fed set to raise interest rates All eyes on Greenspan: Traders watch the chairman on television The US Federal Reserve is expected to raise interest rates by a quarter of a percentage point later on Tuesday. The central bank's aim is to curtail inflationary pressures without getting in the way of economic growth. In June, the Fed raised interest rates to 1.25%, the first upward move for four years. High oil prices and a changing economic picture have, however, raised questions as to whether the central bank will raise rates again this year. The Federal Open Market Committee (FOMC) meets at 1300 GMT and is set to announce its decision at 1815 GMT. When the bank raised interest rates in June, it was widely perceived to be the first of a series of gradual moves, aimed at keeping inflation in check and sustaining economic growth. Federal Reserve chairman Alan Greenspan lent support to this view when he gave a positive report on the US economy before the Senate's banking committee. His statement acknowledged that growing consumer demand had led to a rise in inflation - but also said that he expected growth would continue in the second half of the year. Steady hand? But the evolving economic picture is now lengthening the odds on another rise at the next meeting on 21 September. Friday's US unemployment report raised doubts about the strength of the economy and, in turn, about the need to make credit more expensive. Economists had expected 200,000 jobs to be created in July, but the report showed that only 32,000 jobs had been created. Unemployment dropped to 5.5%, from 5.6% in June, its lowest level since October 2001. The figures could be seen as a temporary setback, but they have also been perceived as bad news for President George Bush ahead of Presidential elections later this year. Expensive energy Oil prices have also risen dramatically, hitting record highs on fears of shortages and low production. "We've now seen two of the Fed's assumptions proved wrong," said Lynn Reaser, economist at Banc of America Capital Management, who is predicting a rise on Tuesday. "Oil prices are staying high and job growth has not resumed. "Given the mind set in the markets that another increase is coming, the Fed is unlikely to wish to disrupt that expectation at this stage." The focus is already shifting from Tuesday's meeting to what the Federal Reserve plans to do at its next meeting and later in the year. Typically, the Federal Reserve outlines the balance of risks to the economy in a statement after the FOMC meeting and it is here that analysts will find clues as to the future level of interest rates.

To: macavity who wrote (52200)	8/10/2004 2:40:43 PM
From: elmatador	Read Replies (1) \| Respond to of 74559

Fed raises rate a quarter- point Associated Press WASHINGTON -- The Federal Reserve boosted a key short-term interest rate by a quarter-point on today as the central bank continued its campaign to keep inflation under control. Fed Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee, the panel that sets interest rates, boosted the target for the federal funds rate to 1.50 percent. The funds rate, the interest that banks charge each, had been at a 46-year low of 1 percent just six weeks ago when the Fed raised it to 1.25 percent, the first increase in four years. The Fed action this week had been expected as analysts predicted the central bank would continue with its campaign to raise rates even in the face of last Friday's report that showed job creation slowed to a near-standstill last month. Analysts said that if the Fed had decided to forgo its widely expected rate hike it would have raised concerns in financial markets that the central bank was worried that the current economic slowdown, which Greenspan has termed a "soft patch," was threatening to become more severe. In explaining its action, the Fed noted that economic growth had moderated somewhat in recent months and "the pace of improvement in labor market conditions has slowed." It blamed this economic slowdown on the jump in energy prices this year but predicted that the economic weakness should be temporary. The Fed statement said that the economy "appears poised to resume a stronger pace of expansion going forward." The Fed also repeated a pledge it made on June 30 when it first raised rates. It said that it believes future rate increases can be made "at a pace that is likely to be measured." Private economists have interpreted that phrase to mean small quarter-point increases in rates at the Fed's regular meetings. The Fed's next meeting will occur on Sept. 21. While another rate increase could come at that time, analysts said it will depend on the data between now and then. If the next employment report shows continued weakness, then the Fed is expected to take a breather in its rate increases. However, if the slowdown that began in June proves to be temporary, as Greenspan has predicted, then private economists said the central bank could well continue with further rate increases in September and at the Fed's last two meetings of the year in November and December. The key will be the performance of the job market, analysts said. In July, the increase of just 32,000 payroll jobs was the weakest showing this year and far below the 200,000-plus that private analysts had been predicting. Also today, the Labor Department reported that productivity in the April-June quarter rose at an annual rate of 2.9 percent, the slowest increase since the final quarter of 2002.