Federal Reserve leaves interest rate at 5.25%

By PBN Staff



The Federal Reserve’s governing board this afternoon agreed to keep its target for the federal funds rate unchanged, at 5.25 percent.


Yesterday’s meeting was the third in a row at which the Federal Open Market Committee had voted to leave the rate unchanged, ending a string of hikes that had stretched back more than a year. Many consumer loans are pegged to the funds rate, which is used in overnight lending between banks.


Explaining its decision, the FOMC said: “Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market.



“Going forward, the economy seems likely to expand at a moderate pace,” the panel said. “Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors ….



“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.



Voting to stand pat on the federal funds rate were FOMC Chairman Ben S. Bernanke, Vice Chairman Timothy F. Geithner, and members Susan S. Bies, Donald L. Kohn, Randall S. Kroszner, Frederic S. Mishkin, Sandra Pianalto, William Poole, Kevin M. Warsh and Janet L. Yellen. Dissenting – as he did at the Fed’s previous two meetings, was Jeffrey M. Lacker, who said he preferred an increase of 25 basis points.


The FOMC’s official statement is available at
www.federalreserve.gov
.