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Reassurance, not rate, tops agenda

Published March 21, 2007


WASHINGTON - Federal Reserve Chairman Ben Bernanke and his colleagues are expected to strike a reassuring tone about the country's economic health today despite persistent worries that problems with risky mortgages could spread.

Fed policymakers opened a two-day meeting Tuesday amid mounting concern on Wall Street, Capitol Hill and elsewhere about troubles in the subprime mortgage market.

These lenders, who make home loans to people with blemished credit histories or low incomes, have been battered. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments. Delinquencies and foreclosures in the subprime mortgage market are soaring.

Economists believe the Fed will try to allay fears that the subprime mortgage industry problems could spill over into other markets and short-circuit overall economic activity.

Against this backdrop, economists predicted Fed policymakers will want to maintain their current stance and leave an important interest rate steady at 5.25 percent. If so, commercial banks' prime interest rate for certain credit cards, home equity lines of credit and other loans, would stay at 8.25 percent.

The Fed's key rate hasn't budged since August. Many economists predict the Fed will probably leave rates where they are for most - if not all - of this year.

An announcement of the Fed's latest interest-rate decision will come this afternoon.

[Last modified March 21, 2007, 01:28:13]

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