By Evelina M. Tainer, Chief Economist, Econoday
3/22/02

The Federal Open Market Committee (FOMC) met on Tuesday and voted to keep the federal funds rate target unchanged at 1.75 percent. But they also shifted their bias towards neutral: "…the risks are balanced with respect to the prospects for both goals (price stability and economic growth)." Even though Fed officials voted unanimously to shift the bias away from easing, they noted that "the degree of the strengthening in final demand over coming quarters, an essential element in sustained economic expansion, is still uncertain."

While the Fed shift towards neutral was in line with expectations, many economists and market players weren't sure how to interpret the announcement. Some economists are predicting that the Fed may raise rates at the May meeting, while others believe the Fed could stay put until the August meeting. There is no doubt that the next move will be a rate hike, the only question is timing.

Market players are growing more concerned that the rate hike will be sooner rather than later as healthy economic data continues to roll in.