Federal Reserve Keeps Interest Rates Unchanged
Federal Reserve policymakers voted to keep the benchmark interest rate unchanged at 1%, and said they expected to hold rates down for "a considerable period" because the threat of deflation remains despite a strengthening economy.
The Fed said in its statement "the risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future."
All 12 members of the Federal Open Market Committee voted to leave the overnight bank lending rate at 1%, the lowest since July 1958. The lending rate is the interest banks charge each on overnight loans and is the Fed's primary tool for influencing economic activity.
Also Tuesday, the Fed left the primary credit discount rate on loans to banks from the Fed system unchanged at 2%.
Prior to the Fed's decision, President Bush said the economy was showing signs of getting stronger following the shock of the stock market decline, recession, corporate scandals and terror attacks, news services reported. Transport Topics
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Statement by the Federal Reserve
The Federal Open Market Committee 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 evidence accumulated over the intermeeting period confirms that spending is firming, and the labor market appears to be stabilizing. Business pricing power and increases in core consumer prices remain muted.
The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level. The Committee judges that, on balance, the risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future. In these circumstances, the Committee believes that policy accommodation can be maintained for a considerable period.
Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Ben S. Bernanke; Susan S. Bies; J. Alfred Broaddus, Jr.; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Robert T. Parry; and Jamie B. Stewart, Jr.
