Bank Economists Predict Fed Will Raise Rates

A prominent group of U.S. economists predicted that the Federal Reserve would boost interest rates by a quarter of a percentage point at its rate-setting meeting next week. The economists panel of the American Bankers Assn. expects the vibrant U.S. economy to slow this year, but the group believes that is not happening quickly enough to allow the Fed to quit its rate-raising campaign. “Despite the [bond] market’s hope that a soft landing is here, the economy’s momentum will prompt the Fed to pull the throttle back a bit more before activity settles,” said Carl Tannenbaum, chairman of the association’s Economic Advisory Committee. “It is likely that the Fed will raise rates by 50 basis points this summer.” The forecast goes against the view of most economists on Wall Street, who expect the Fed to pause at the June 27-28 meeting. The bank economists, on average, projected the economy would cruise along at a brisk pace of 4.1% in 2000, moderating to 3.3% in 2001.