Federal Reserve policy-makers left the
benchmark U.S. interest rate at a 45-year low and said they can
hold down borrowing costs for a “considerable period” even as
the risk of slowing inflation recedes.
“The probability of an unwelcome fall in inflation has
diminished and now appears roughly equal to a rise in inflation,”
the Federal Open Market Committee said in a statement. The FOMC
voted 12-0 to leave the overnight bank lending rate at 1 percent,
the lowest level since 1958.
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Investors had been split about whether the Fed would drop the
“considerable period” phrase after the economy grew last quarter
at the fastest rate in 19 years. By keeping the language and
tweaking its stance on disinflation, the FOMC may be setting the
stage for a rate increase next year, economists said.
“This is the first step to prepare the market for the
coming changes in policy,” said John M. Bartlett, director of
market strategy at Commerce Trust Co., which manages $10 billion
in St. Louis. “They did a nice job in sending that subtle
message, while at the same time keeping that ‘considerable period’
phrase so as to not totally alarm the markets.”
Bloomberg News
