by David Williams
WASHINGTON, Aug 10 (AFP) - US Federal Reserve policymakers opened a meeting Tuesday apparently determined to push up interest rates even in the face of unexpectedly weak employment growth.
The Federal Open Market Committee (FOMC) was broadly expected to raise the federal funds target rate, which banks charge each other overnight, to 1.50 percent from 1.25 percent.
An announcement is expected at about 2:15 pm (1815 GMT).
"We expect a quarter-point hike," said Wells Fargo Bank chief economist Sung Won Sohn.
Federal Reserve chairman Alan Greenspan seemed to be locked into an interest rate tightening cycle, which began June 30 when he edged up the key rate from a 1958 low of 1.0 percent in a pre-emptive blow at inflation.
A failure to raise rates now would risk panicking financial markets about the state of the economy, analysts said.
Greenspan's plans were being tested, however, by a recent string of weaker-than-expected economic data in the summer, including a startlingly feeble employment report for July.
Employers hired just 32,000 extra workers in July, a government report showed Friday, shattering expectations for a 240,000-strong rebound from a sluggish June.
As a result, many investors and analysts say the pace of future increases, once expected to be running at a quarter-point at each FOMC meeting, could slow.
"I am more interested in what the (Federal Reserve) statement will say about the current economic conditions and possible Fed action in the future," Sohn said.
"My hope is that they will acknowledge the economic softness that is going on now and also perhaps indicate that ... monetary policy could be on hold if upcoming economic data do not confirm economic growth."
Sohn said he expected solid growth activity ahead, however, leading to quarter-point increases in interest rates at the remaining three FOMC meetings this year.
The next FOMC meeting, September 21, is the last before November 2 presidential elections.
"Really, the big question mark is the price of oil and its impact on the economy," Sohn said.
Oil prices acted like a tax on the consumer, he said, potentially slowing activity sufficiently to force a suspension in the cycle of rising interest rates.
New York's light, sweet crude for September delivery hit an all-time high of 44.99 dollars in electronic trade overnight. After inflation, however, prices remain well below levels reached in the 1970s oil shock.
Joel Naroff, president of Naroff Economic Advisors, agreed that the Federal Reserve policymakers were likely to raise key interest rates by a quarter-point but issue a cautious statement.
"I expect them to put in some sort of sentence that they will carefully monitor the data going forward, giving an indication that if the data is weak they might consider holding off in September," he said.