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Monday, August 18, 2003
Steady Fed rate desired for rest of year
WASHINGTON -- The Federal Reserve's benchmark overnight bank rate is appropriate at 1 percent and shouldn't be changed for at least the rest of this year, according to a majority of business economists in a new survey.
"Two-thirds of our panelists feel monetary policy is about right and support leaving it unchanged over the next six months," said Tim O'Neill, president of the National Association for Business Economics, which conducted a poll of its 194 members July 25-Aug. 6.
Fed policy makers last week voted unanimously to keep the key interest rate unchanged at 1 percent and said rates will stay low for a "considerable period" to help the economy grow faster.
The Fed funds rate hasn't been lower in 45 years. Gross domestic product expanded at an annual rate of just 1.9 percent in the first half of the year.
Most respondents didn't expect the central bank to use "unconventional" methods to bolster the economy during the next six months, such as buying long-term Treasury notes or pursuing quantitative monetary targets.
There was doubt about how successful the buying of government bonds would be.
A majority of those surveyed also said they would support inflation targeting, in which the Federal Reserve would pledge to maintain a specific, numerical rate of price increases over several quarters. Fed policy makers have engaged in a public debate over the merits of inflation targeting, with Chairman Alan Greenspan in opposition.
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