Economists are in agreement with today’s stand pat decision on interest rates by the U.S. Federal Reserve Board.

As expected, the Fed left the federal funds rate unchanged at 1.25% today. It also maintained its neutral policy bias, in a unanimous decision. The Fed even suggested that the incoming data since the November FOMC meeting suggest that the U.S. economy is working its way out of its current soft spot, comments BMO Nesbitt Burns.

“I’d have to agree with that assessment, although last week’s disappointing ISM (manufacturing) and employment reports have put a damper on sentiment and aborted the 8-week rally in the U.S. stock market, at least temporarily,” notes BMO. “Nevertheless, leading indicators are looking up. Initial unemployment insurance claims have edged downward, and some of the regional manufacturing indicators have shown some marked improvement.”

RBC Financial calls today’s meeting, “one of the least pivotal Fed meetings in recent memory.” It says that the Fed is expected to be on hold for much of next year, however it thinks that U.S. rates will be trending higher in the second half as the recovery in world demand gains strength, geopolitical concerns ease and confidence rises. “In addition, the recent personnel changes on the White House economic team suggest more fiscal stimulus could be on the way, another reason the U.S. economy will be getting stronger rather than weaker over 2003.”

BMO agrees, saying that the Fed’s next meeting is on January 28-29, “and they are likely to remain on the sidelines then as well, particularly given that the new Bush economic team will be aggressively lobbying for tax cuts to further stimulate the economy.”

The Bank of Canada convenes once again on January 21. “No action there is likely either. For now, look for roughly 3% growth in Canada and the U.S. next year,” concludes BMO.