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Investors wait for Fed's decision on lower interest rates

A trader checks a computer screen on the trading floor of the New York Stock Exchange Monday. Investors took profits from last week's big rally and considered the possibility that the Federal Reserve might not cut interest rates. PHOTO: AP

Federal Reserve policymakers were set to gather yesterday under the gaze of financial markets amid widespread expectations they will hold US interest rates steady.

But chances were rising the US central bank might at least use its post-meeting statement to signal concern that economic weakness was a rising threat, potentially setting the stage for rate cuts later this year.

The Federal Open Market Committee was scheduled to kick off its meeting at 9am eastern time in the US and to announce at about 2:15pm its decision on whether to keep the trend-setting federal funds rate at 1.75 percent.

That is a four-decade low for the trend-setting rate reached after the Fed cut rates an aggressive 11 times to soften the impact of an economic downturn.

However, the recovery seen as all but certain in the early months of the year has shown signs of slowing recently.

This has made most economists push out their expectations for when rates might actually rise until well into next year and has convinced a handful of them the Fed may actually cut rates again before the end of this year.

Although few economists believed a cut in borrowing costs at this meeting was likely, investor hopes helped spur a four-day rally in blue-chip shares last week.

The NASDAQ composite index finished all but flat Monday, up less than one point at 1,306.69 as investors held positions.
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