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Interest rates

seen steady in

US, falling

in Japan

WASHINGTON: The US Federal Reserve, encouraged by signs that the economy is on the mend, is widely expected to hold off from cutting interest rates further at a policy-making meeting on Tuesday.

With inflation steady and growth picking up, analysts said the central bank has no reason to tinker with policy now after reducing rates last month for the first time in nearly three years. "They should be content," said Robert Dederick, chief economist at Chicago-based Northern Trust Co. "There is no need to rush into another rate move."

Only two of 30 economists and Wall Street analysts surveyed by Reuters expect the central bank's policy-setting Federal Open Market Committee (FOMC) to decide on rate cut Tuesday.

BUNDESBANK

In Frankfurt, Bundesbank council member Ernst Welteke on Sunday welcomed last week's rise in the US dollar and said he thought there was still scope for the German central bank to cut interest rates.

"The question is whether the Bundesbank will stick with the current interest rate level or will have to reach a different decision," Welteke, who heads the regional central bank for Hesse which is based in Frankfurt, told German radio.

"Of course money supply and price data developments will play a role in that. Certainly we will also keep on eye on exchange rate developments," he said, adding: "There is scope for a rate cut."

Many economists still expect the central bank to cut its four percent discount rate again in coming weeks, citing low inflation and stabilising money supply growth.

But some have changed their views after last week's sharp rise in the US dollar, triggered by intervention by the Bundesbank, US Federal Reserve and Bank of Japan.

They argue the Bundesbank would not cut interest rates if it was likely to spark a further fall in the mark.

JAPANESE BANKS

Japanese banks and the postal saving system will raise interest rates on time deposits from Monday following the yen's recent decline, a daily said.

It will be the first broad-based rise in interest rates for deposits since December, the Yomiuri Shimbun said Sunday.

The rise followed the recent yen's decline, which is widely expected to help boost the flagging Japanese economy. The dollar hit a six-month high of 99.05 yen last week on joint intervention by Japan, Germany and the United States.

Financial institutions said that lower interest rates were unlikely for the time being, but added that this did not signal a full reverse in the trend of falling interest rates, the newspaper said.

Commercial banks will raise the interest rate of one-year time deposits of less than three million yen (310,000 dollars) by 0.1 percentage point to 0.6 percent per year and that of two-to-five-year time deposits by about 0.2 percentage points.

Trust banks will raise the scheduled yield for "Super Hit" money in trust that is not withdrawable for one year by 0.05 point to 0.70 percent per year.

The posts and Telecommunications Ministry will boost rates for time deposits of three years or more by 0.05 percentage points, Yomiuri said.-Reutern-AFP