The US Federal Reserve is expected to hold overnight interest rates steady and reaffirm concerns about inflation at its meeting today.
Federal policy-makers began meeting earlier today against a backdrop of unsettled financial markets and were expected to announce their decision on interest rates in a statement later today.
The Federal Reserve looks certain to hold the benchmark federal funds rate at 5.25 per cent, the level it was raised to in June last year, but it may acknowledge emerging signs of economic weakness.
Financial market participants will scour the Federal Reserve's announcement for any sign of anxiety that rising default rates in the US sub-prime mortgage market and tightening corporate credit conditions could damage the economy.
As the meeting began, the Labour Department reported that second-quarter worker productivity grew at an annual rate of 1.8 per cent - below forecasts. Unit labour costs that are taken as one gauge for inflation risks rose at a 2.1 per cent rate that was modestly above expectations.
In recent statements, Federal officials have said housing market weakness and financial market volatility have not spilled over into the broader economy, and they have held to their forecast of steady, if somewhat sluggish, growth through 2007.
The US economy grew at annual rates of 0.6 per cent in the first three months of the year, and 3.4 per cent in the second quarter of 2007. The Federal Reserve's central forecast is for growth of between 2.25 and 2.5 per cent for 2007.