US rates rise seen as unlikely

It will be the sizzle and not the sausage that US Federal Reserve watchers will be examining when the central bank's policymakers meet to set interest rates today.

The bank's open markets committee is thought to be highly unlikely to raise the cost of borrowing from its present low level of 1.75%, after last Friday's figures showed US unemployment at its highest rate for more than seven years.

Instead, Fed watchers will be trying to decipher any signals the bank may give about when it is likely to tighten monetary policy.

Before Friday's deep revision to the jobless figures, many analysts were expecting the Fed to wait until next month at the earliest before returning rates to an upward path.

But the recent weak figures and a stream of downbeat comments from business executives now suggest the committee will retain its "neutral" bias on rates in the comments it publishes to accompany its decision this evening.

Although the present level of 1.75% is the lowest US rates have been at for 40 years, the central bank's policymakers are likely to wait for stronger investment and employment data before signalling a shift to tighter monetary policy.

· Hopes of a recovery in the eurozone were boosted by figures yesterday showing a fourth successive rise in service sector activity. An index of 2,000 firms indicated that the recovery seen in the sector since January was continuing, with activity in April marginally higher than the previous month.