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Last Updated: Tuesday, 13 December 2005, 01:09 GMT
Fed 'set to raise rates to 4.25%'
Federal Reserve Chairman Alan Greenspan
Financial markets will be trying to read Mr Greenspan's signals
The US Federal Reserve is expected to raise interest rates on Tuesday, sparking a debate over whether it has reached the end of its cycle of hikes.

While most analysts forecast a quarter of a percentage point raise to 4.25% - the 13th hike in a row - they are split over whether more will come.

Key will be the wording of the Fed's statement, with some reckoning that it will abandon the word "accommodating".

Should that happen, then it may signal borrowing costs are close to a peak.

'Non-surprising fashion'

"There's a high degree of confidence the Fed is going to conduct itself in a non-surprising fashion tomorrow," said Jim Awad, chairman of Awad Asset Management.

The main concern facing the Fed is that it does not snuff out the steady recovery in the US economy by raising rates too far, too quickly.

In its recent statements, the central bank has said it would continue to adopt a "measured" increasing of interest rates as the economy emerged from a slowdown and it looked to control accelerating inflation.

Many analysts are predicting that the Fed will keep increasing borrowing costs, and have tipped the current cycle of hikes to peak at 4.75% next year.

The Fed's statements will be pored over by the markets, especially as its chairman Alan Greenspan is due to step down on 31 January after more than 18 years in the job.

Ben Bernanke, currently head of President George W Bush's Council of Economic Advisers and himself a former Fed governor, will take over.

An expert reacts to the interest rate rise

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