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. Last Updated: 07/27/2016

Greenspan to End Term With Rate Hike

WASHINGTON -- Fed Chairman Alan Greenspan will end his 18-year rule Tuesday with a rate hike of a quarter percentage point and the message that borrowing costs may go up in March if warranted by growth and inflation.

Disappointing fourth-quarter U.S. gross domestic product numbers on Friday should not shake Federal Reserve confidence that the economy is on a reasonably solid footing, analysts said.

But higher core inflation shown in the data ought to ensure that it retains a slight tightening bias, which markets bet means one more rise before ending the current rate-hike cycle.

"The statement will continue the thrust that confidence on their part is quite strong on economic fundamentals and they place a higher risk on inflation," said Lynn Reaser, chief economist of Bank of America Capital Management.

Analysts also expect some adjustment to the Federal Open Market Committee's statement to indicate future actions will be shaped by how the economy unfolds, which would also provide some flexibility for incoming Fed Chairman Ben Bernanke.

"They must leave the slate clean for Bernanke. Giving the impression that they are done [at 4.5 percent] would ... extend Greenspan's tenure beyond Jan. 31," said Anthony Chan, chief economist at JPMorgan Private Client Services.

A key phrase in the last FOMC statement was "some further measured policy firming is likely to be needed," and 16 of 18 analysts polled by Reuters on Thursday expected this to be modified, perhaps changing "is likely to" to "may" be needed.