WASHINGTON (Reuter) - The U.S. Federal Reserve decided Wednesday to hold interest rates steady.
The central bank's decision, disclosed after a two-day meeting in Washington, had been widely expected. It left the key federal funds rate that commercial banks charge each other for overnight loans unchanged at 5.25 percent and the discount rate that the Fed charges banks for money at 5 percent.
``The Federal Open Market Committee meeting ended at 11:35 a.m.,'' central bank spokesman Joseph Coyne said. ``There is no further announcement.''
With inflation tame and, by at least one measure, at a 30-year low, the U.S. central bank had scant justification for raising short-term interest rates now, economists said.
Many believe it is only a matter of time before the Fed tightens credit, however. With the job market taut and wages picking up, the Fed will eventually need to raise rates a notch if it wants to keep inflation in check, they said.
The next meeting of the policy-making Federal Open Market Committee is on March 25. But it could conceivably raise rates before then if economic conditions warranted such a move.
The economy ended 1996 with a bang, growing at a 4.7 percent annualized rate in the final three months of the year. That was more than double the pace of the previous quarter and the fastest rate of growth in 2 1/2 years.
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Geeze, looks like the markets wanted the Fed to tighten, as we're now in a free-fall.
Could be that the markets now believe the Fed will HAVE to tighten at the next FMOC in March. Market prices could start to reflect this new outlook.
KH |
