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Federal Reserve Holds Interest Rates Steady; Policymakers See Improvements on Inflation.
The Federal Reserve held interest rates steady Thursday, extending a yearlong breather for borrowers. Although policymakers observed improvements on inflation, they made clear they were
not ready to declare victory on that front.
Wrapping up a two-day meeting, Fed Chairman Ben Bernanke and his central bank colleagues
left an important interest rate at 5.25 percent, the same as it was last June. The decision was
unanimous.
The Fed's decision means that commercial banks' prime interest rates -- for certain credit cards, home equity lines of credit and other loans -- should stay at 8.25 percent.
Before the Fed's interest-rate pause, borrowers had endured two years of rate increases. The
current period of level rates can help them regain their footing by paying down or consolidating debt.
Looking at economic conditions, Fed officials said readings on "core" inflation, which
excludes energy and food prices, have gotten "modestly" better in recent months.
In noting this improvement, they abandoned language in previous statements that described
underlying inflation as "somewhat elevated."
Even so, Fed policymakers continued to identify the "predominate" risk to the economy as
inflation's failure to moderate as they now anticipate. "A sustained moderation in inflation
pressures has yet to be convincingly demonstrated," according to the statement.
On the sidelines for eight straight meetings, the Fed does not want investors or consumers to
think it is letting down its guard on inflation.
The Fed once again said future rate moves will hinge on what incoming data says about inflation and economic growth. Many economists believe the Fed will keep rates steady at its next meeting Aug. 7, and probably through the
year. |
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