Federal Reserve policy-makers voted
unanimously to leave the benchmark U.S. interest rate unchanged,
giving the economic expansion more time to speed up and counter a
“weakening” labor market.
The 12 voting members of the Federal Open Market Committee
left the overnight bank lending rate at 1 percent, the lowest
since Dwight Eisenhower was president in July 1958.
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“Spending is firming, although the labor market has been
weakening,” committee members said in a statement following the
meeting. “Business and pricing power and increases in core
consumer prices remain muted.”
Policy makers said the risk of inflation becoming
“undesirably low remains the predominant concern for the
foreseeable future.” Consumer prices minus food and energy rose
1.3 percent in the 12 months ending August, the smallest gain
since February 1966, the Labor Department said today. Without
ability to raise prices, companies hesitate to hire and expand.
“The Fed is likely to keep its foot down hard on the
monetary policy accelerator until the labor market firms up,”
said Chris Rupkey, senior economist for the Bank of Tokyo-
Mitsubishi. “We look for the Fed to remain extremely
accommodative out through the presidential elections next year.”
Democratic challengers are criticizing President George W.
Bush for failing to create jobs. The economy lost 93,000 jobs last
month, the seventh straight decline. First-time unemployment
claims rose to a two-month high of 422,000 last week, a sign that
companies are still shedding workers.
Bloomberg News
