The U.S. Federal Reserve Tuesday decided to stand pat on the federal funds rate – the prevailing rate for overnight loans among banks – ending a string of rate hikes that stretches back to June 2004.
At its meeting in Washington, D.C., the policy-setting Federal Open Market Committee voted 9 to 1 in favor of keeping the rate at 5.25 percent. Dissenting was Jeffrey M. Lacker, president of the Richmond Fed, who according to the Federal Reserve’s post-meeting news release favored an increase of 25 basis points.
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“Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices,” the Fed statement said.
“Inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand,” the statement added. “Nonetheless, the Committee judges that some inflation risks remain.
“The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”
The news release echoes recent statements by Ben S. Bernanke, the Fed’s new chairman. Its full text can be found online at www.federalreserve.gov.
