Fed funds rate expected to stay steady
The Federal Reserve meets tomorrow on interest rates, and Fed watchers expect the federal funds rate to stay at 2 percent. Jeremy Hobson reports why some say a steady rate is more likely -- and why it may be safer.
Federal Reserve seal on $100 bill (iStockPhoto)
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Scott Jagow: The Federal Reserve has been very busy lately, rescuing investment banks and trying to loosen the credit markets. But one area where it might be hands-off time is interest rates. The Fed meets tomorrow on that. Jeremy Hobson has more from Washington.
Jeremy Hobson: Fed watchers expect the federal funds rate to stay at 2 percent. Former Fed Governor Lyle Gramley, now at the Stanford Group, says any hike in rates to stave off inflation would scare the markets and hurt economic growth.
Lyle Gramley: If you thought a person had a pimple on his forehead, and a big dose of chemotherapy would cure it but it might kill him, what would you do?
So, he says keeping rates steady is likely.
Princeton economist Alan Blinder agrees. But he says the Fed is far from hamstrung.
Blinder: As we know, the Fed is doing lots of other things to try to shore up the financial system with lending facilities of all kinds. They're doing quite a lot.
If the rate does stay at 2 percent tomorrow, it will have been there since April.
In Washington, I'm Jeremy Hobson for Marketplace.
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