MercoPress. South Atlantic News Agency

Fed rates unchanged but inflation risks “remain”

The Federal Open Market Committee decided Wednesday to keep interest rates unchanged at 5.25% for the third consecutive month but also expressed concerns about inflation risks.

"Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace", said the FOMC report.

The decision was anticipated by markets which were more interested in reading between lines to guess what can be expected in the coming FOMC meetings. US rates have been on hold since August, following 18 months of successive rises.

Further on the release points out that "readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand".

Nonetheless, FOMC judges that "some inflation risks remain" and looking to the future, "the extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information".

Policymakers want to control inflation while ensuring the slowdown in economic activity does not worsen into a prolonged downturn. Analysts will now be looking to Friday's data particularly on GDP expansion and the extent of the US economy slowdown.

Wednesday's rate decision was the last before next month's US mid-term Congressional elections. Any rate change would have been politically significant as it would have affected borrowing levels and made a clear statement about the health of the economy. FOMC is scheduled to meet again December 12.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; William Poole; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points.