This is Bob Doughty with the VOA Special English EconomicsReport.

Financial markets are preparing for something that has nothappened since May of two-thousand. The United States central bank,the Federal Reserve, is expected to raise interest rates at the endof this month.

Interest is the cost to borrow money. As the cost increases,people generally borrow and spend less. Less spending means lessdemand. And that generally keeps prices from rising. So economistssay interest rates are an important tool to fight inflation.

Last week, Federal Reserve Chairman Alan Greenspan said thecentral bank "will do what is required" to keep prices undercontrol. This is known as price stability.

Later, the president of the Federal Reserve Bank of Clevelandsaid current interest rates are too low. Sandra Pianalto saidinflation pressures appear reasonably under control right now. Butshe added that she is concerned that they could increase.

Another Federal Reserve Bank president warned that recent priceincreases must be watched closely to see how much is temporary. JackGuynn in Atlanta said Federal Reserve policymakers need to react towhatever happens.

The policymakers said in May that rate increases are likely tocome at a "measured" speed. But Mister Greenspan says they areprepared to act more quickly if needed.

The Federal Reserve lends money to other banks at a rate set bythe system's Open Market Committee. The federal funds rate iscurrently one percent, the lowest since nineteen-fifty-eight. Thisis not the rate for individual borrowers, however. Banks borrow fromthe Federal Reserve so they can then lend money to businesses,individuals and each other.

Low interest rates have led to record numbers of home sales inrecent years. Now, interest rates for home loans are increasing.

Economists say they are concerned that growth in jobs, highenergy prices and increased demand in the economy will push pricesup. The government says prices rose at a yearly rate offour-point-four percent in the first four months of this year. Forall of last year, the inflation rate was less than two percent.

The Federal Open Market Committee will meet in Washington for twodays, starting June twenty-ninth. The committee is expected to raisethe federal funds rate from one percent to one-point-two-fivepercent.

This VOA Special English Economics Report was written by MarioRitter. This is Bob Doughty.