Indiana Grain Company, LLC

Posted: 03/16/10

By: tomgrisafi

The US Federal Reserve was widely expected to keep its key lending rate at virtually zero percent Tuesday as financial markets look for signals of future monetary policy tightening.

Central bank chief Ben Bernanke chairs the one-day session of the Federal Open Market Committee, which analysts expect to be a heated affair with some members seeking to end the Fed's pledge to keep rates low "for an extended period."

The Fed had maintained the federal funds rate -- at which banks charge each other for loans -- at an unprecedented zero to 0.25 percent range since December 2008 to help the economy recover from its worst financial crisis in decades.

"There is no sign whatever that Mr. Bernanke or the Washington-based governors believe a shift in tone, let alone policy, is warranted at this point," said Ian Shepherdson, chief US economist for High Frequency Economics.

Specifically, he said, the Fed was unlikely to change or drop the key language from recent policy statements: "Economic conditions... are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

At least three regional central bank chiefs would like to change the language of the traditional statement issued at the end of the meeting but only one -- Kansas City Fed president Thomas Hoenig -- is a voting member of the FOMC this year, noted Shepherdson.

The 12-member FOMC comprises seven members of the Fed's board of governors and five of the 12 regional central bank chiefs. Two vacant board seats have not been filled.

Source: AP, Reuters

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