Federal Reserve On Track For Maintaining Interest Rates

By Stewart Douglas

The Federal Reserve are today expected to make a decision on US central interest rates, according to widespread economic opinion and Federal Reserve convention.

US interests currently stand at 5.25%, reflecting a base rate by which much variable consumer and commercial lending is tracked.  Increases in interest rate are used to dampen economic growth, whilst slashing the cost of borrowing promotes growth and spending within an economy.

But analysts are widely predicting rates to remain unchanged pending the announcement at 2.15 this afternoon.

This is despite growing concerns as to the health of the US economy, and a consistent interest rate policy for over a year.

Economic indicators throughout the US are mixed, suggesting some aspects of the economy are strong whilst others are still flailing.

Inflation remains a problem, whilst bad debts in the lending sector are continuing to rise, causing problems for fragile mortgage lenders.

Conversely, growth has surpassed analyst and government expectations, and worker productivity has just been announced to have increased at the fastest rate since early 2006.

Continuing problems in the housing market have held back the rest of the US economy, and with an extreme case of oversupply and lack of buyer confidence, an argument could be made for slashing interest rates to promote borrowing.

However, the US lending market has also come under scrutiny in recent months, after the full-scale of the sub-prime lending crisis has been uncovered to the tune of $100 billion, and has resulted in numerous massive mortgage lenders issuing profit warnings as they stand on the brink of bankruptcy.

The Federal Reserve are widely expected to maintain rates in a bid to calm inflation, whilst casting concern as to the health of the country’s markets, and the problems faced over the last month.