The U.S. Federal Reserve on Wednesday is expected to make what may be the last -- at least for the time being -- of a string of interest-rate cuts.
The Fed's hope a combination of monetary and fiscal stimulus and rising global inflation will boost the weak U.S. economy, allowing a pause in the sharp easing cycle it kicked off in mid-September.
Fed Chairman Ben Bernanke and his colleagues have lowered benchmark overnight lending rates 3 full percentage points to 2.25 percent during that span.
Policy-makers meeting on Tuesday and Wednesday look set to lower them by a slim quarter point and then step aside to see whether their efforts have the desired effect in spurring an economy buffeted by a housing slump and chaotic credit market.
While officials still worry about downside risks for the economy, which they think may be facing recession, they also are concerned forecasts for an ebbing in inflation may prove off track. Soaring prices for oil and food have fed a global inflationary surge, sparking food riots in some countries.
"The Fed's intention to pause its easing cycle may be part of an international effort to stabilize the falling value of the dollar, in light of the deteriorating state of world food prices," said Ashraf Laidi, chief foreign exchange strategist at CMC Markets US in New York.
A Reuters survey on Friday of the 20 big bond firms that deal directly with the Fed in the markets found that all of them expect a quarter-point rate cut this week.
Interest-rate futures markets are less certain. Late on Friday, rate futures showed a 76 percent chance of a cut, but an almost one-in-four chance the Fed would hold steady. They also suggest rates will end the year back at 2.25 percent.
Source: Xinhua/Agencies
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