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The Fed held rates steady on May 6, but Greenspan went on to say at the meeting that the balance of risks to the economy was “weighted toward weakness over the foreseeable future.” The Fed’s concerns about weakness centered on the possibility of outright price deflation in the U.S., an unprecedented point of focus for our central bank. This means the Fed is poised to deliver another rate cut if conditions warrant, possibly before the June 25 FOMC meeting. It also means that rate hikes are not likely anytime this year, so we’ve moved our projection of the first increase in the federal funds rate from the fourth quarter of this year into the first quarter of 2004.

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