Interest Rates Likely to Increase at Next Fed Meeting

Not sure how much this matters to many because so few are able to borrow right now (at the soon-to-be-previous rates, that is). This may help wake lenders out of their current funk, that's at least one possibility. We shall see.

Aug. 26 (Bloomberg) -- Federal Reserve officials agreed at their meeting this month that their next move in interest rates will be to raise them, while reaching no conclusion on the timing of such a decision, records of the gathering show.

``Although members generally anticipated that the next policy move would likely be a tightening, the timing and extent of any change in policy stance would depend on evolving economic and financial developments,'' according to minutes of the Aug. 5 Federal Open Market Committee meeting released in Washington.

The minutes today show a debate over the magnitude of the inflation threat, with two groups of officials making different judgments on the impact of the recent slide in commodity prices. Policy makers also diverged on whether financial turmoil continues to pose the risk of a more severe credit crunch.

The Fed left its benchmark lending rate unchanged at 2 percent for the second straight meeting on Aug. 5. At the time, traders estimated a 31 percent chance of at least a quarter- point increase by the end of the year, futures prices show. Now, that probability is 22 percent.

``There is a big split on the FOMC, no doubt about that,'' said Lyle Gramley, a former Fed governor and senior economic adviser at Stanford Group Co. in Washington. ``We know there is a severe credit crunch, but it is difficult outside the housing market to pin down how much impact it is having on the economy.''

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