MercoPress. South Atlantic News Agency

US interest rates forecasted to keep rising

United States interest rates will rise consistently during the coming months and well into 2005 according to a survey among Wall Street analysts.

According to a poll among 35 US bond brokers the Federal Reserve will double interest rate increases by 125 basic points, which should see them reach 3,5% by December 2005.

The Federal Reserve has been raising interest rates since last June and now stand at 2,25%.

"The risks of inflation acceleration and a more resistant economy will make the Fed push rates 50 points higher than we had expected only a month ago, so federal funds rates most probably will increase 125 points during 2005", said a market analyst from Morgan Stanley.

Forecasts for the basic rate in the coming months ranged between 2,25% and 4,25%, with two analysts saying they will remain unchanged.

Interest rates in United States are now higher that in the Euro zone following the latest decisions from the Federal Reserve and the European Union Central Bank.

The European Commission in Brussels announced Monday that the Eurozone economy is expected to expand 2,1% this year and 2% in 2005.

Although admitting a weaker US dollar is hurting Euro exports, at the same time it helps mitigate the higher energy prices which are nominated in US dollars.