The futures markets are predicting a stand-pat policy on interest rates by the U.S. Federal Reserve when it meets next week, according to The Wall Street Journal [subscription required]. Even so, some economists say investors should not feel overly emboldened by the futures outlook.

"I still put the odds of Fed rate increase at 30%," economist Glen Langan told BloggingStocks Tuesday. "A stand-pat policy is not guaranteed. Not hardly."

Langan's case for a rate hike: core inflation increasing in the U.S., commodity prices increasing both domestically and internationally, and a need to support the dollar -- the latter of which, via its decline, has increased inflation via price increases in dollar-denominated international goods.

Too many rate cuts in 2008?

Further, Economist David H. Wang said that the Fed hawks may also voice another factor during the upcoming monetary policy meeting: an overly accommodative stance by the Fed following the bursting of the U.S. housing bubble.

"On the one hand, there is the sluggish U.S. economy, which the doves will argue necessitates low rates through the summer and probably longer. Their case is strong," Wang said. "On the other hand, the interest rate hawks will say 'we shouldn't have eased rates so much' and that the Term Auction Facility and other liquidity tools the Fed launched addressed the housing and credit crunches at their roots, not interest rate cuts."

Nevertheless, Wang says there's only "a 20-30% chance" the Fed will opt to increase interest rates next week.

In an effort to jump-start the U.S. economy slowed by the nation's worst housing slump in a generation, the Fed has cut short-term interest rates by 325 basis points to 2% since September 2007.

The Fed will announce its interest rate decision and release its policy statement on Wednesday, June 25, 2008 at 2:15 p.m. EDT.