Fed Keeps Rates Steady; Drops 'Considerable Period' Phrasing

Click here for the full text of statement by the Federal Reserve.

ederal Reserve policy makers voted unanimously on Wednesday voted to hold the benchmark interest rate at 1%, the lowest since 1958, but dropped their commitment to hold rates low "for a considerable period."

The overnight bank-lending rate, also known as the federal funds rate, is the interest banks charge each other on overnight loans and the Fed's main lever for influencing the economy. Low rates can spur consumer and capital spending, which can help the economy and the trucking industry.

"The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation,” the Fed said in its statement. “With inflation quite low and resource use slack, the committee believes that it can be patient in removing its policy accommodation."

In its final three statements of 2003, the Fed said “policy accommodation can be maintained for a considerable period'' to ward off the risk of further disinflation.

However, removal of the "considerable" phrase may not indicate that a rate increase is imminent, economists told Bloomberg.

"The evidence accumulated over the intermeeting period confirms that output is expanding briskly," the Fed said. "Although new hiring remains subdued, other indicators suggest an improvement in the labor market."

The Fed last reduced the federal funds rate on June 25, the 13th rate cut since January 2001. Its next meet-ing is scheduled for March 16.

Also Wedneday, the Fed left the largely symbolic primary credit discount rate on loans to banks unchanged at 2%. Transport Topics

HR>

A NAME="storya">

Statement by the Federal Reserve

The Federal Open Market Com-mittee decided today to keep its target for the federal funds rate at 1 percent.

The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evi-dence accumulated over the intermeeting period confirms that output is expanding briskly. Although new hiring remains subdued, other indicators suggest an improvement in the labor market. Increases in core consumer prices are muted and expected to remain low.

The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.

11078