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Fed funds rate expected to stay steady

Federal Reserve seal on $100 bill

TEXT OF STORY

Scott Jagow: The Federal Reserve has been very busy lately, rescuing investment banks and trying to loosen the credit markets. But one area where it might be hands-off time is interest rates. The Fed meets tomorrow on that. Jeremy Hobson has more from Washington.


Jeremy Hobson: Fed watchers expect the federal funds rate to stay at 2 percent. Former Fed Governor Lyle Gramley, now at the Stanford Group, says any hike in rates to stave off inflation would scare the markets and hurt economic growth.

Lyle Gramley: If you thought a person had a pimple on his forehead, and a big dose of chemotherapy would cure it but it might kill him, what would you do?

So, he says keeping rates steady is likely.

Princeton economist Alan Blinder agrees. But he says the Fed is far from hamstrung.

Blinder: As we know, the Fed is doing lots of other things to try to shore up the financial system with lending facilities of all kinds. They're doing quite a lot.

If the rate does stay at 2 percent tomorrow, it will have been there since April.

In Washington, I'm Jeremy Hobson for Marketplace.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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