Updated at 10:22 a.m., Wednesday, May 9, 2007
Fed leaves short-term rates unchanged at 5.25 percent
Associated Press
WASHINGTON — The Federal Reserve left a key interest rate unchanged today as the economy signaled that it was on track for a soft landing in which growth slows enough to restrain inflation.Fed Chairman Ben Bernanke and his colleagues voted to keep the federal funds rate, the interest that banks charge each other, at 5.25 percent. It marked the seventh straight meeting at which the Fed has kept rates steady.
The decision had been widely expected, but some Wall Street investors were still disappointed that the Fed did not modify its worries about inflation given recent data showing price pressures have eased a bit.
The Dow Jones industrial average, which had spiked right before the announcement, at first dropped on the announcement but then made up the lost ground. Analysts viewed the minor changes in the Fed's announcement as a signal that the central bank is not likely to change rates any time soon.
"This statement signals no change for awhile," said David Jones, head of DMJ Advisors, a private forecasting firm.
Jones said he still believes the Fed's next move will be a rate cut, but perhaps only one quarter-point reduction late in the year after inflation has eased further in response to a weaker job market.
The Fed's last rate change occurred nearly a year ago — on June 29, 2006 — when the funds rate was increased for a 17th straight time. That capped a two-year period in which the central bank pushed the funds rate up from a 46-year low of 1 percent in an effort to slow the economy enough to restrain rising inflation pressures without pushing the country into a recession.
