FED CONTINUES TO BE CAUTIOUS ON INTEREST RATES

One example of careful tinkering that has contributed to the overall positive mood of Americans, as registered in the recent nationwide poll, is the Federal Reserve Board's cautious attitude toward interest rates.

This week, the Fed held off on any changes in interest rates. The rates were last adjusted in March, when key rates were nudged up by a quarter of a point.

Some analysts see small interest-rate increases on the horizon -- as early as next month or November -- to ward off inflation due to wage pressures. Such a move could be the result of low unemployment. The jobless rate is at its lowest level in a quarter of a century. Employers in a tight labor market tend to increase benefits and wages to attract workers, which has an inflationary impact.

But not everyone agrees that interest rates need to go up. Sen. Tom Harkin, D-Iowa, says the nation is in such a non-inflationary environment that the Fed should be looking at lower rates. "The truth is that real interest rates continue to be high by historical standards," Harkin said.

So far, the Fed has avoided any rash moves that would push the economic pendulum wildly in either direction. It can only be assumed that the central bank will be just as cautious in the months to come.