While there is little doubt the US Federal Reserve will leave interest rates steady after this year's last policy meeting yesterday, what policy-makers will say about their future course is more of a mystery.
Wall Street is united in forecasting that the Fed will keep the federal funds rate, charged on overnight loans between banks, at a 45-year low of 1 percent, biding time while a recovering US economy gathers strength.
What some economists are wondering is whether language adopted in August pledging low rates for a "considerable period" might be dropped -- a development that likely would be seen as policymakers' first signal to prepare for rate rises.
Even if that unusually explicit language is scrapped in the post-meeting statement, no one is forecasting a rate increase any time soon.
In fact, most of the 22 big Wall Street firms that deal directly with the Fed in the markets expect rates to be on hold until at least mid-2004, according to a recent Reuters poll. None expected a rate move yesterday.
Among the bond firms polled, 10 said the low-rate pledge would go; two others said it might and two said it would likely be dumped at the next meeting in January.
There were positive and negative reasons for policymakers to stand pat on rates: there is no sign of inflation on the horizon to force their hand but neither is there solid evidence that the transition from a weak to a strong, job-generating expansion has been completed.
In an interview on Monday, US Treasury Secretary John Snow highlighted the exceptionally low rate of price rises evident in the economy despite an eye-popping 8.2 percent annual rate of growth in gross domestic product during the third quarter ended Sept. 30.
"Core inflation is at the lowest level in 40 years, so I don't think that we need to lose any sleep currently over the prospects of inflation," Snow said.
Over most of the past year, policymakers' main concern has not been their long-time foe -- inflation -- but rather the risk of deflation, or a punishing spiral downward in prices that could sap wages and profits while leaving debt intact.
Some analysts said lingering concern about the direction of prices could be one more reason to stand pat all around, leaving rates, the warning on potential disinflation and the "considerable period" framework intact to underline commitment to spur confidence and growth.
Until there is firm evidence the expansion is brisk enough to fuel price rises that need dampening, the argument runs, why risk costlier credit that might in turn hinder spending and investment?
"Fed officials aren't sure what level of inflation they are comfortable with, but they are now universally convinced they are not comfortable with deflation, or even the risk of deflation," Lara Rhame, an economist with Brown Brothers Harriman in New York, wrote on Monday.
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