Federal Reserve Keeps Interest Rates Steady
September 17, 2008
I was waiting..and waiting..and waiting to write a post about what the Federal Reserve should do about interest rates and had to stop pending their announcement. I did not want to venture a guess and it’s a good thing that I did not.
Although reducing the rate may help out some homeowners and borrowers, especially those with Home Equity lines, it could actually have an unwanted effect and result in higher mortgage interest rates for the rest of us.
Luckily, I bit my tongue in trying to hurry a post and make a prediction. In a statement that was released yesterday…
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.
I guess the Fed needed to quickly make an announcement and move on to bigger and much more pressing issues. Like what in the world are they going to do with AIG?
I’ll keep you posted.
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