The US, casting aside fears about weak job creation and tepid holiday sales, appeared set to raise interest rates tomorrow for the fifth time in a row.
Federal Reserve policymakers would raise the federal funds target rate, which commercial banks charge each other overnight, by a quarter point to 2.25 percent, analysts said.
A decision by the Federal Open Market Committee is due at about 2.15pm tomorrow.
"For the first time in recent history, there is some uncertainty surrounding the Fed's actions, at least amongst economists," said Wells Fargo Bank senior economist Bill Natcher. "There is a minority opinion that given the weaker than expected labor report for the month of November, the Fed will wait for the upcoming retail sales report issued the day prior to their meeting before any monetary policy decision is made."
"If sales are weak, so the argument goes, the Fed will pause on December 14," he said.
Traders, however, were betting on a quarter percentage point rise, with the futures market pricing in a near 100 percent certainty of such a rise in borrowing costs.
"Our view is consistent with the markets and we continue to maintain that the Fed is not influenced by single data points," Natcher said.
The Federal Reserve seemed bent on higher interest rates, he said, noting Fed Chairman Alan Greenspan's recent comment that anyone not bracing for higher rates was "desirous of losing money."
Speculation of a pause in the central bank's promise of a "measured" increase in rates has been fed by unexpectedly weak US employment and retail sales.
A Dec. 3 government report showed the economy only produced a net 112,000 new jobs last month, about half the number predicted by analysts, even though the jobless rates eased a bit to 5.4 percent from 5.5 percent.
Sales of major store chains rose just 1.7 percent last month from a year ago, said a survey sponsored by the International Council of Shopping Centers, after a year earlier gain of 3.7 percent.
It was smallest year-on-year increase since August and a crushing start to what should be the fastest sales period of the year.
Signs of rising price pressures also appeared sure to keep the central bank policy intact. US producer prices -- a measure of inflation at the wholesale level -- rose by a faster-than-expected 0.5 percent last month, seasonally adjusted Labor Department data showed on Friday.
Wall Street economists had widely predicted a tepid 0.1 percent price increase for last month when compared with October.
Over the year, producer prices had soared by a 14-year record 5 percent, stoked by surging energy costs. Excluding food and energy, core producer prices were up 1.9 percent over the year.
"Although there is some talk that the Fed does not like to play the Grinch ahead of the holiday shopping season by hiking interest rates in December, we doubt that this would be a powerful enough reason to pause in hiking interest rates this month," Lehman Brothers analysts Joseph Abate, Drew Matus and John Shin said in a joint report.
"Instead, with growth likely to reach 4 percent in the fourth quarter and signs that core inflation is drifting up, the Fed still has plenty of incentive to reduce policy accommodation this month," they said.