Analysts expect rate rises to continue
September 19, 2005
Results of a poll of Wall Street economists released on Monday show that only 4 out of the 22 who were asked feel that the US Federal Reserve will not raise US interest rates when it meets on Tuesday.
The rest expect the Fed to raise rates another 25 basis points to 3.75 percent despite the effects of Hurricane Katrina. This opinion is based on the comments of several Fed officials who have commented that Katrina will not substantially effect the US economy.
The poll, which was conducted by Reuters, shows that most economists do believe that the Fed will decline to raise interest rates at least once in their remaining meetings this year. Comments from Fed officials seem to indicate that they are more worried about the prospect of inflation than they are about the economic fallout of Katrina. The presidents of both the San Francisco and Chicago Federal Reserve Banks have cited price stability as their number one concern.
San Francisco Fed president Janet Yellen has said that Katrina has raised inflation pressures, and Chicago Fed president Michael Moskow was quoted as saying that he was worried about core inflation being at the “upper end of the range” where prices can remain stable.