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Federal Reserve expected to leave key rate at 2% Sue Kirchhoff Worried that rising inflation poses an increasing threat to the economy, the Federal Reserve is expected to end its nearly year-long campaign of steep interest rate cuts when it meets starting today. Fed officials, in their scheduled two-day meeting, could hold their key rate for short-term lending at its current 2% for some time, as growth remains sluggish. Economists and market analysts will closely scour the policy statement to be issued Wednesday afternoon with the target interest rate for clues as to how long the Fed could stand pat before possibly increasing interest rates. Fed officials "are still at a delicate stage, where if the rhetoric gets too strong, the risk is that (market-based interest rates) move up," slowing economic growth, says Mike Wallace of Action Economics. Wallace expects the Fed to stay on the sidelines this week and raise rates slightly in August. Since September, the central bank has cut its federal funds rate, what banks charge each other for overnight loans, to 2% from 5.25%. The rate is a benchmark for many business and consumer loans.
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