US interest rate poised to rise

Policy makers at the Federal Reserve are widely expected to raise US interest rates for the first time in nearly four years on Wednesday.

The benchmark US interest rate is currently at 1%, its lowest since 1958.

Fed officials, including chairman Alan Greenspan, have hinted in past weeks that the central bank is willing to move to control price growth.

The central bank's Federal Open Market Committee (FOMC) is widely expected to raise borrowing costs a quarter-point.

The FOMC meeting got under way in Washington on Tuesday.

Asian investors were anticipating a US rate rise on Wednesday, though with differing results for the region's stock markets.

Japanese investors took a wait-and-see approach, and the benchmark Nikkei closed almost unchanged - down 0.02% - while surging bank stocks pushed up Hong Kong's Hang Seng index 1.3%.

In Europe, the UK's FTSE 100 closed down 1.07%, France's CAC 40 down 0.63% and Germany's DAX down 0.42%.

Healthy economy

Last week the US Commerce Department revised up its inflation figures.

It said the core price index for consumer spending - a central inflation measurement that cuts out volatile food and energy prices - rose by 2% in the quarter, up from 1.7% a month ago.

The figures added strength to the argument for an interest rate rise in order to dampen inflationary pressures.

Other figures in early June, showing nearly a quarter of a million jobs were created in the US last month, have made a rate rise more likely.

And on Tuesday, a report said US consumer confidence was at a two-year high, another sign the economy is in an increasingly healthy condition and could absorb a small rate rise.

'Measured' pace

Since 2001, Mr Greenspan has cut rates steadily to offset the effects of the popping of the technology bubble in the late 1990s, the 11 September attacks, and the wars in Afghanistan and Iraq.

Mr Greenspan has said he would move at a "measured" pace in returning rates to normal.

In April he told Congress' Joint Economic Committee that rates would eventually have to rise.

Market analysts will be watching closely the wording of any announcement on Wednesday, to see whether the Fed continues with its plan for a slow pace of tightening or whether it shows impatience for rapid rate rises.