The Federal Open Market Committee is unlikely to cut U.S. interest rates when it meets Tuesday says Dr. Sherry Cooper, chief economist at BMO Nesbitt Burns.

Her forecast follows of the heels of Monday’s announcement that U.S. President George Bush will make a televised speech at 20:00 ET this evening. The White House has concluded that the United Nations has failed to enforce its own resolutions.

“The only way to avoid war now is for Saddam Hussein to leave the country, which does not seem likely,” notes Cooper.

Earlier Monday, U.N. Secretary General Kofi Annan said the weapons inspection process in Iraq is over. The U.N. is pulling all of its people out of Baghdad.

Cooper observes that market reaction to these latest developments have been extremely muted. “Gold and oil prices, as well as the Canadian dollar, have retraced much of their overnight gains.” All attention will be focused this week on the early results of the war, which is likely to start before week’s end, she predicts.

Cooper notes that the move toward war is heightening fear of the possibility of terrorist reprisals as well as the use of weapons of mass destruction on coalition troops and on Israel. “The Fed is unlikely to cut interest rates in this tense environment when it meets tomorrow,” she says.

“Instead, we are looking for a shift to an ‘easing bias’, with no immediate action. A rate cut could come before the next FOMC meeting on May 6, if the U.S economy weakens further.”