to hold interest rates steady today, they got it on Friday when the Dow Jones industrial average suffered its second biggest drop ever.

While the stock market recovered some of its poise yesterday, a rate rise now would trigger an avalanche of selling by increasing the cost of credit, analysts said yesterday.

"A move on Tuesday would send the markets into a tailspin since the only conclusion would be that the economy is growing much faster than anyone believes and there is a real threat that inflation would reaccelerate,'' said Joel Naroff, an economist for First Union Corp. of Charlotte, North Carolina.

"I do not believe that the Fed is ready to send that message,'' he added.

Recent economic data suggest growth is moderate and inflation is steady as the US economy continues its unbridled expansion in its seventh year. A weakening dollar and mounting concern about the outlook for corporate profits sent US stocks diving on Friday. The Dow Jones industrial average shed more than 247 points to close at 7,694.66, its second biggest point drop in history.

Wall Street was still jittery yesterday, but the dollar stabilised overnight and stocks resumed their upward trend after initial hesitancy at the opening bell.

Analysts said higher rates, which would raise the cost of credit and make buying bonds relatively more attractive than buying stocks, was bound to frighten nervous investors even further and risk a real crash on Wall Street -- rather than what many described as Friday's short-term correction.

"Since I thought there was about a zero chance of a Fed move before (Friday), I think there is a less-than-zero chance that they are going to move now,'' said Bruce Steinberg, chief economist at Merrill Lynch in New York. "They're on hold.'' The central bank's Federal Open Market Committee will convene for its one-day meeting to chart the course of US rates, the sixth such session this year, at 10 a.m. Bermuda time and is expected to announce its decision at 3.15 p.m.

Bermuda time.

The Fed last changed interest rates on March 25, when it raised the federal funds rate -- the rate banks charge each other for overnight loans -- by a quarter point to cool off the economy and keep price pressures in check. The central bank kept its hand steady at the committee's last two meetings in May and July, convinced that buoyant growth would return to a more sustainable path by itself.

Gross domestic product, the value of all goods and services produced in the United States, grew an unusually strong 4.9 percent in the first quarter of this year, but growth slowed down to 2.2 percent in the April-July quarter as consumer spending slowed and inventories began building up.

Most analysts expect a rebound in the third quarter, but a shrinking number believe it will be strong enough to entice the Fed into raising rates before next year.

"There'll be a pickup from what was a pretty depressed second quarter, but I don't think we're going to see excessive growth in the second half,'' said Merrill Lynch's Steinberg. "I don't think the Fed is moving this year.'' The continuing strike at United Parcel Service, the biggest package carrier in the US, was expected to put further pressure on the Fed not to raise rates.

The labour action, in its 15th day yesterday, has hurt businesses across the country and is likely to put another damper on overall business activity. The Fed asked UPS last week in a letter to describe the economic impact of the strike. Fed economists are expected to be briefed in detail by company officials before the meeting today, during which the strike was "likely to come up,'' as one senior Fed official told Reuters.