Interest rates likely to remain unchanged

By Martin Crutsinger
Associated Press

WASHINGTON — Though the economy is still struggling, the Federal Reserve is expected to pass up a chance to prod growth by lowering interest rates at its meeting tomorrow.

But Fed Chairman Alan Greenspan and his colleagues may send a strong signal that lower rates are still possible if the economy does not pick up.

The wait-and-see approach might seem odd given the latest jobs report, which showed the unemployment rate returning to an eight-year-high of 6 percent. Job losses now top one-half million over the past three months, a layoff level usually associated with recessions.

But analysts said today that the bad news on jobs in April had to be balanced against more recent statistics indicating things were getting better since U.S. tanks rolled into Baghdad. Consumer confidence is rising and oil prices falling.

"The victory in Iraq has brought oil prices way down. Consumer confidence has improved, and we have had a pretty good rally in the stock market," said Lyle Gramley, senior economic adviser for Schwab Washington Research Group and a former Fed board member. "All of these things would suggest a pickup in the economy in the latter half of this year."

Many analysts expected that the Federal Open Market Committee, the group of Fed board members and regional bank presidents who meet eight times a year, will leave rates unchanged for a fourth straight meeting.