MercoPress. South Atlantic News Agency

Fed leaves rate unchanged at 1%.

The United States Federal Open Market Committee decided this Tuesday to keep its target for the federal funds rate at 1 percent. FOMC argued that “the risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future”

The official release indicates tha the "Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the inter-meeting period confirms that spending is firming, although the labor market has been weakening. Business pricing power and increases in core consumer prices remain muted.

The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level. The Committee judges that, on balance, the risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future. In these circumstances, the Committee believes that policy accommodation can be maintained for a considerable period.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Ben S. Bernanke; Susan S. Bies; J. Alfred Broaddus, Jr.; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Robert T. Parry; and Jamie B. Stewart, Jr.

The US Commerce Department reported early this week that retail prices increase was the lowest since February 1966. The consumer price index in August expanded 0,3% and the subjacent index excluding food and energy was actually 0,1%. In the last twelve months US consumer price index has increased 1,3% the lowest in 37 years.

Energy costs in August increased 2,7%, the largest since last March and the main factor behind the overall August 0,3%. Actually gasoline prices in August jumped 6% the highest since last February. Excluding food and energy, the so called subjacent prices index has contracted 2,5%, its main retraction since records began in 1958.