Fed Seen Adhering To Higher-RatesPolicy

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WASHINGTON - (08/10/04) -- The Federal Reserve is expected toshrug off last week's poor jobs report and other slowing economicindicators and move again Tuesday to raise short-term interestrates. "There's been a lot of speculation with weak second quartergrowth and employment figures that (that the Fed would hesitate),still we're looking at another 25 basis point move tomorrow," saidJeff Taylor, an economist at NAFCU. The continued rise in inflationand strong growth in gross domestic product, of around 4%, shouldprompt the Fed to hold steady on its efforts to slow growth byhiking interest rates, he said. Taylor predicted the Fed's OpenMarket Committee will lift the target rate for overnight FedFundsto 1.50% Tuesday, and add another 25 bps in two more meeting overthe coming months, to end the year at 2%. The FedFunds target isthe benchmark for short-term loan rates, including car loans, homeequity loans, and adjustable-rate mortgages.

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