MercoPress. South Atlantic News Agency

Fed expected to leave rates unchanged

The United States Federal Reserve is expected to leave interest rates unchanged when its Monetary Committee convenes this week. The threat of war and the slowing of the US economy will be the prevailing facts behind the decision according to Wall Street analysts.

Although many economists believe economic activity in the US was almost flat in the third quarter of 2002, most of them feel it was a temporary situation and recovery will be strong in 2003. The big question for the Fed is "will the economy overcome the weak spot?" remarked Andrés Porcekansky a Wall Street analyst.

Last November in an attempt to bolster the economy the Fed lowered the Federal funds basic rate half a point to 1,25%, the lowest in four decades. The Fed is expected to make its official announcement on Wednesday. A day later the Commerce Department will be releasing fourth quarter and final 2002 growth figures. Even if 2002 GDP numbers are not encouraging, several Fed members have lately expressed a cautious optimism about 2003, anticipating the year will end with a strong expansion of the economy.

"I believe that conditions for a sustained recovery, and for recovery to pick up speed as we advance are very good", said Robert Mc Teer, member of the Dallas Fed Reserve.

Economists are counting that if there's war it will be short, and together with a fiscal package currently under consideration by Congressional leaders, prospects for 2003 are promising, including the Fed's decision to leave rates unchanged.

However some economists cautioned about the growing weakness of the US dollar as a Middle East full conflict become closer. Particularly the Euro that in the last few weeks has jumped to a three years record selling at 1,10 US dollars.