Fed holds rates steady, stays inflation-wary
WASHINGTON - The U.S. Federal Reserve held benchmark interest rates steady at 5.25 percent for a fourth straight meeting, while renewing a warning that risks from inflation remain. In a statement outlining its decision, the Fed said it continues to focus on inflation risks, holding out the prospect that interest rates may need to move higher in coming months, even as it took note of the "substantial" cooling in the U.S. housing market. Financial markets did not react sharply to the Fed's statement, which was largely as expected. U.S. stocks pared losses, prices for U.S. government bonds rose slightly and the value of the dollar slipped. The decision was not unanimous. As he had at the previous three meetings, Richmond Federal Reserve Bank President Jeffrey Lacker dissented, saying he believed higher borrowing costs are needed to keep inflation in check. Lacker's string of dissents is the longest by a Fed policy-maker since then-Cleveland Fed President Jerry Jordan dissented four straight times in 1998. U.S. output grew at a 2.2 percent annual rate in the third quarter, slowing from 2.6 percent in the second quarter and 5.6 percent in the first three months of the year. Many economists see the U.S. long-term trend growth rate at around 3 percent. While Fed Chairman Ben Bernanke and his colleagues have said higher-than-desired core inflation is a worry, they expect it to ease as slower growth pushes up unemployment. A slowdown in housing is expected to dampen consumer spending. Wal-Mart, the world's largest retailer, said sales at its U.S. stores open at least a year fell 0.1 percent from November 2005, the first decline since April 1996.
So far, however, the economy has proven resilient.
http://news.yahoo.com/s/nm/20061212/bs_nm/usa_fed_rates_dc_2
WASHINGTON - The U.S. Federal Reserve held benchmark interest rates steady at 5.25 percent for a fourth straight meeting, while renewing a warning that risks from inflation remain. In a statement outlining its decision, the Fed said it continues to focus on inflation risks, holding out the prospect that interest rates may need to move higher in coming months, even as it took note of the "substantial" cooling in the U.S. housing market. Financial markets did not react sharply to the Fed's statement, which was largely as expected. U.S. stocks pared losses, prices for U.S. government bonds rose slightly and the value of the dollar slipped. The decision was not unanimous. As he had at the previous three meetings, Richmond Federal Reserve Bank President Jeffrey Lacker dissented, saying he believed higher borrowing costs are needed to keep inflation in check. Lacker's string of dissents is the longest by a Fed policy-maker since then-Cleveland Fed President Jerry Jordan dissented four straight times in 1998. U.S. output grew at a 2.2 percent annual rate in the third quarter, slowing from 2.6 percent in the second quarter and 5.6 percent in the first three months of the year. Many economists see the U.S. long-term trend growth rate at around 3 percent. While Fed Chairman Ben Bernanke and his colleagues have said higher-than-desired core inflation is a worry, they expect it to ease as slower growth pushes up unemployment. A slowdown in housing is expected to dampen consumer spending. Wal-Mart, the world's largest retailer, said sales at its U.S. stores open at least a year fell 0.1 percent from November 2005, the first decline since April 1996.
So far, however, the economy has proven resilient.
http://news.yahoo.com/s/nm/20061212/bs_nm/usa_fed_rates_dc_2
