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Fed is likely to retain key rate
 
Tuesday, Aug 05, 2008 - 12:08 AM 
 
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THE ASSOCIATED PRESS

An ugly brew of rising unemployment, spiking foreclosures and gyrating energy prices is plaguing the country and making life difficult for Federal Reserve Chairman Ben Bernanke as he tries to right the economy.

Bernanke and his central bank colleagues are faced with dueling problems: weak economic growth and advancing inflation. To treat one risks aggravating the other. So the Fed is widely expected when it meets today to leave a key interest rate alone.

"It is caught between a rock and a hard place. The [Fed] will stand pat," predicted Sung Won Sohn, a California State University professor.

If Sohn and other economists are correct, the Fed's rate will stay at 2 percent. In turn, the prime rate for millions of consumers and businesses would stay at 5 percent. The prime applies to certain credit cards, home-equity lines of credit and other lines.

 

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