The long-frustrated wait for a boom in American jobs will force Federal Reserve policymakers to hold key short-term interest rates at a 1958 low, analysts said.
Federal Reserve chairman Alan Greenspan leads a meeting of the Federal Open Market Committee tomorrow and Wednesday to ponder interest rates.
A written decision is due at about 2:15pm Wednesday.
Though they may tweak the wording of a regular statement on rates, Greenspan and his colleagues are likely to leave rates unchanged in the first half of the year, and possibly for the whole year, economists said.
"My expectation is that there will probably be no change in 2004," said Wells Fargo Banks chief economist Sung Won Sohn.
"Employment is really still fairly sluggish and the Fed wants to see a period of significant employment gains before hiking the interest rate," he added.
The US economy generated just 1,000 jobs last month, the government reported this month, shocking economists, who had projected average job growth of 148,000 in the month.
Lingering deflation concerns also would stay the Federal Reserve's hand, Sohn said.
Presidential elections in November were another barrier.
"I don't believe the Fed plays politics, but in an election year, you are going to have to have an awfully good economic justification for raising interest rates, and I don't think they do this year," he said.
Analysts expected the Federal Reserve to repeat a commitment to keep rates low for a "considerable period" because of the economic slack, both in the labor market and manufacturing.
The federal funds target rate, which commercial banks charge each other for overnight loans, lies at a more than 45-year low of 1.00 percent.
"The economy is doing better in real terms. Inflation is under control," said Moody's Investors Service chief US economist John Lonski.
"However, still substantial amounts of slack in both the labor market and in manufacturing weigh against the nearness of any rise by inflation risks," Lonski said.
He predicted no change in rates before June, even if the economic outlook appeared to be brightening.
"A lot depends on whether or not we can consistently increase rates of resource utilization between now and June," Lonski said.
"By that, what I am stating is that you probably have to grow payrolls by at least 150,000 jobs a month over the next several months," Lonski said.
Greenspan told a conference in Berlin this month that a jobs recovery had been delayed by sharp improvements in business productivity, which could not be sustained for long.
"It's just a matter of time before we begin to see employment start to pick up quite significantly as it always has in the past," the powerful central bank boss said.
If employment appears healthy by June, the Federal Reserve could raise the federal funds target rate to 1.25 percent or even 1.5 percent without braking economic growth, expected to be 4.5 percent this year, Lonski said.
Lehman Brothers economist Ethan Harris said Federal Reserve policymakers would likely lock the interest rate at 1.00 percent until consumer price inflation approached two percent or until the unemployment rate -- at 5.7 percent last month -- neared 5.0 percent.
"We think a Fed tightening -- and any significant changes to the wording of the announcement -- is a long way off and will depend not on economic growth but rather signs of a narrowing in the output gap," Harris said.