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End is seen to US round of rate cuts
Hugo Duncan, Evening Standard25.06.08
The US Federal Reserve was today set to abandon its aggressive rate-cutting stance amid growing concerns over rising inflation.
The Fed, led by chairman Ben Bernanke, has slashed rates from 5.25% to 2% since September in a struggle to steer the faltering economy away from recession.
Surging oil prices, the banking crisis and rising unemployment suggest the US is not out of the woods, but hopes are growing that the worst is past.
Like central bank counterparts in Europe, Fed officials are talking tough on inflation, suggesting there will be no further rate cut in America tonight. Inflation in the US is running at 4.2% compared with 3.7% in the eurozone and 3.3% in the UK.
Philip Shaw of Investec said: "Given a string of hawkish comments from various senior Fed members, a further easing certainly seems off the cards this time and we expected the committee to keep the funds target on hold at 2%."
Brian Bethune of Global Insight said: "While downside risks to growth undoubtedly remain, upside risks to inflation have intensified."
The Fed is expected to voice discomfort on inflation but stop short of signalling a near-term rate rise.
