Fed plans to debate how rates may rise
BY THE ASSOCIATED PRESS
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Published: November 3, 2009
WASHINGTON — Even with the Federal Reserve widely expected to leave interest rates at a record low this week to nurture the fragile recovery, fissures are growing among policymakers about when to start boosting rates to head off inflation.
A shift to higher borrowing costs is probably months away, but
Fed Chairman Ben Bernanke and his colleagues likely will debate how best to signal a change to investors, businesses and Americans when they open a two-day meeting today.
At its meeting in late September, the Fed opted to stretch into early next year a key program aimed at forcing down mortgage rates. Fed policymakers gather as the economy emerges from the worst recession since the 1930s.
After a record four straight losing quarters, the economy started growing again last quarter, although most of the fuel came from government-supported spending on homes and cars.
Despite the turnaround, growth won’t prevent unemployment — now at a 26-year high of 9.8 percent — from rising. It’s expected to top 10 percent.
Against that backdrop, most economists think the Fed will keep the target range for its bank lending rate at zero to 0.25 percent. If it does, commercial banks’ prime lending rate, used to peg rates on home equity loans, certain credit cards and other loans, will stay at about 3.25 percent, the lowest in decades.
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