Higher interest rates are on the way early next year, analysts say, even though the Federal Reserve has decided not to play Scrooge during the Christmas season.

Private economists disagree on the size and frequency of future rate increases. But they say the economy is too strong and the danger of inflation too great for central bank policymakers to remain on the sidelines for long."They chose, wisely in my opinion, to leave monetary policy unchanged for a time," said economist Eugene Sherman of the New York investment firm M.A. Schapiro & Co. after the policy-setting Federal Open Market Committee adjourned Tuesday without boosting rates.

Sherman predicted the central bank would resume pushing interest rates higher on Feb. 1, at the conclusion of the next meeting of the 12-member FOMC. He said he expects four interest rate increases in 1995, each one a half-percentage point.

But economist Stephen Roach of Morgan Stanley & Co. in New York City said rates could be near their peak during the current cycle.

"Unless I'm wrong on the inflation risk, the Fed has very little tightening to do," he said.

View Comments

David Jones of Aubrey G. Lanston & Co., a New York government securities dealer, speculated the next increase in rates could come as early as mid-January - even before the next FOMC meeting at the end of the month.

Federal Reserve Chairman Alan Greenspan may have been given authority Tuesday by the committee to "pull the trigger again then," Jones said, if inflation figures are worrisome.

Fed "actions will be very sensitive to price increases from now on to stifle any expectations of inflation," he said.

The Fed, which has boosted rates six times since February, held off moving again after meeting in private for nearly four hours Tuesday.

Join the Conversation
Looking for comments?
Find comments in their new home! Click the buttons at the top or within the article to view them — or use the button below for quick access.