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Fed seen raising rates for 11th time despite Katrina Washington, Sept 20  US Federal Reserve policy-makers began meeting on Tuesday amid widespread expectations they will stick to a course of gradual rate rises, despite some calls for a pause in the wake of Hurricane Katrina. Shortly before the US central bank’s Federal Open market Committee began meeting at 9 a.m. EDT (1300 GMT), fresh government data showed a dip in new housing construction in August but not enough to indicate a threat to expansion. The Fed is expected to announce its decision on interest rates at around 2:15 p.m. EDT (1815 GMT) in a statement setting out its analysis of the economy’s prospects and the level of policy accommodation that it considers it has put in place. Earlier speculation that the damage the storm wrought on the U.S. Gulf Coast might prompt a hiatus in the Fed’s rate-rise campaign has faded as forecasters largely concluded the central bank would push ahead with its policy tightening. As of Monday, 18 of 22 Wall Street firms that deal directly with the Fed saw another quarter-percentage point hike. Economists, in recent days, have come around to the view that the Fed will lift rates, persuaded the policy-setting members of the Federal Open Market Committee have their eye on the longer-run prize of controlling potential inflation. Fed officials have done little to dissuade them. “The Fed has and must have a commitment to price stability,” San Francisco Fed President Janet Yellen said on Sept. 8, days after the storm damaged Gulf Coast oil refineries and distribution facilities. “The uncertainties on the upside (for inflation) have only gotten bigger since Katrina slammed into the Gulf Coast.” The federal funds rate, the Fed’s primary monetary policy tool, now stands at a four-year high of 3.5 percent after a course of 10 gradual increases that began 15 months ago. “We are led to conclude that the current tightening cycle still has further to go,” said economist Anthony Chan of JPMorgan Asset Management in Columbus, Ohio. He said he would be “shocked” if policy-makers do not at least mention Katrina, but added that the massive aid pouring into New Orleans and other affected regions trumps anything the Fed could do to help with a rate pause. On Tuesday, the Commerce Department said August housing starts fell from July by 1.3 percent to a 2.009 million unit annual rate. —Reuters

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