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FED Decision on interest rates
sashimaal- Top contributor
- Posts : 5785
Join date : 2014-02-28
sashimaal- Top contributor
- Posts : 5785
Join date : 2014-02-28
The Federal Reserve left interest rates on hold yesterday but warned that the risks were now tilted towards further unwelcome falls in inflation.
Voting unanimously to keep interest rates at 1.25 per cent, the Fed's open market committee released a statement with the decision that said: "Recent readings on production and employment, though mostly reflecting decisions made before the conclusion of hostilities, have proven disappointing."
The risks to economic growth - one of the Fed's key objectives - were balanced, the Fed said.
But in an echo of Fed chairman Alan Greenspan's warning last week, the committee said that the risks arising from another fall in inflation - its other objective - from its already low level outweighed the risk from it rising.
Overall, the risks to growth and inflation taken together were on the downside, it said.
Mr Greenspan's favoured measure of inflation recently fell to an annualised rate of just 0.9 per cent and the Fed has been eager to show that it will head off any sign of deflation.
Though the decision to stay on hold had been widely predicted, Wall Street economists had been split on whether they expected the central bank to resume the neutral stance on the balance of risks it took in its November, December and January meetings.
In its most recent meeting in March, the Fed took the unusual step of declining to give a risk assessment, citing the uncertainties surrounding the Iraqi war .
Stock prices in the US fell slightly after the decision, following sharp increases in equity prices in Japan, Europe and the US earlier in the day. The Fed said it still expected the US recovery to gather pace. - (Financial Times Service)
Voting unanimously to keep interest rates at 1.25 per cent, the Fed's open market committee released a statement with the decision that said: "Recent readings on production and employment, though mostly reflecting decisions made before the conclusion of hostilities, have proven disappointing."
The risks to economic growth - one of the Fed's key objectives - were balanced, the Fed said.
But in an echo of Fed chairman Alan Greenspan's warning last week, the committee said that the risks arising from another fall in inflation - its other objective - from its already low level outweighed the risk from it rising.
Overall, the risks to growth and inflation taken together were on the downside, it said.
Mr Greenspan's favoured measure of inflation recently fell to an annualised rate of just 0.9 per cent and the Fed has been eager to show that it will head off any sign of deflation.
Though the decision to stay on hold had been widely predicted, Wall Street economists had been split on whether they expected the central bank to resume the neutral stance on the balance of risks it took in its November, December and January meetings.
In its most recent meeting in March, the Fed took the unusual step of declining to give a risk assessment, citing the uncertainties surrounding the Iraqi war .
Stock prices in the US fell slightly after the decision, following sharp increases in equity prices in Japan, Europe and the US earlier in the day. The Fed said it still expected the US recovery to gather pace. - (Financial Times Service)
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