NEW YORK (MarketWatch) -- Surging commodity prices and strident warnings from Federal Reserve officials about inflation have some in the market betting that the central bank will increase interest rates as early as this fall, according to closely watched federal funds futures contracts.
Yet, five other indicators flatly contradict that outlook, suggesting that the central bank will instead opt to keep borrowing at currently low levels to prevent the ailing U.S. economy from experiencing even more pain.
Analysts point to at least five reasons the Fed won't rush to raise rates: 1) lending rates show the credit crunch continues; 2) the banking system is still fragile; 3) rates hikes in election years are rare; 4) the economy, especially housing, still poses a threat; and 5) flattening the yield curve could pressure bank profits.
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