Fed set to embark on 'measured' interest rates rise campaign

28 Jun, 2004

US Federal Reserve officials are set to raise interest rates this week for the first time in four years - the first step in what they hope will be a "measured" campaign to keep inflation at bay as the economy strengthens.
The Fed's policy-setting Federal Open Market Committee meets on Tuesday and Wednesday and is widely expected to raise overnight borrowing costs a modest quarter-percentage point from the current 46-year low of 1 percent.
Analysts said the rate hike would probably have little impact on consumers, since an array of credit costs, including mortgages, have already moved higher in anticipation.
"I don't think there has ever been in US history a better advertised forthcoming rate increase," St. Louis Fed President William Poole said earlier this month.
While drama may be lacking about the rate move itself, suspense still reigns over what the Fed will say when it makes it and how aggressive the newly launched cycle will need to be over the coming months.
After the last FOMC session in early May, officials said they thought they would be able to raise rates at a "measured" pace. Earlier this month, Fed Chairman Alan Greenspan said this was still the central bank's view.
Analysts have widely taken that to mean a protracted series of quarter-point moves.
The Fed nursed the economy through a recession and a slow recovery with cheap credit, cutting interest rates to a rock-bottom 1 percent in 13 steps starting in January 2001.
In a Reuters poll of 21 large bond firms that deal directly with the Fed, all said they expect the Fed to retain some version of this "measured" rate outlook in its post-meeting statement.

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