US Federal Reserve keeps key rate steady
WASHINGTON - The US Federal Reserve held a key interest rate steady yesterday and voiced greater concern about inflation, taking a step down a road that could lead to higher borrowing costs.
The decision by the United States central bank, announced at the end of a two-day meeting, leaves the benchmark federal funds rate at 2 percent.
It was the first time the Fed has held rates steady at a policy-setting session since embarking on a series of rate reductions in September to put a floor under an economy hit hard by a housing downturn and credit crisis.
In a brief statement explaining the decision, Fed Chairman Ben Bernanke and his colleagues cited both the threats to growth and rising inflation pressures as problems confronting the economy at the moment.
The statement said: ‘Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.’
The decision by the Federal Open Market Committee came after a 9-1 vote. Only Richard Fisher, president of the Fed’s regional bank in Dallas, cast a dissenting vote. Mr Fisher preferred an immediate increase in interest rates to fight inflation.
Mr Michael Cloherty, an interest-rate strategist in New York at Banc of America Securities LLC, said before the announcement: ‘Sounding more concerned about inflation is sort of baked in the cake. It’s the growth side of things where there’s more potential variability.’
REUTERS, AFP, AP
Source : Straits Times - 26 Jun 2008
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