The Federal Reserve did not signal a cut in short-term interest rates Wednesday, despite expectations of an easing after the policymaking Federal Open Market Committee met this week.
The stock and bond markets had rallied Tuesday on the hope the central bank would ease in response to weak money-supply growth and a 17% plunge in housing starts in April.
Many economists expected a cut of one-quarter percentage point in the target for the federal funds rate, to 3.50%. The markets retreated Wednesday after the easing failed to take place.
Employment Data Due
Still, economists have not given up hope of an easing. "I think the Fed will ease because the economic numbers, including housing and unemployment, are mixed enough to warrant another easing in its eyes," said Alan Lerner, chief economist at Bankers Trust New York Corp.
Those expecting an easing are now looking to June 5, when the employment data for May will be released.