MercoPress. South Atlantic News Agency

Federal Reserve leaves rates unchanged at 5.25%

Judging that some inflation risks remain and also factors “restraining aggregate demand”, the Federal Open Market Committee from the Federal Reserve, chaired by Ben Bernanke decided Tuesday to leave interest rates unchanged at 5.25%.

In the official release the Federal Reserve states that "economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market" and although recent indicators have been mixed, the US economy "seems likely to expand at a moderate pace on balance over coming quarters".

According to recent surveys and statistics, manufacturing activity has been the weakest in more than three years and the once-buoyant housing market has cooled markedly.

Further on the Fed underlines that "readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures".

But "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".

Finally the Fed adds that it will closely monitor the evolution of inflation and economic growth and "the extent and timing of any additional firming that may be needed to address inflation risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information".

This is the fourth time running, (since August) that the Fed keeps rates unchanged following 18 months of successive rises.

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 in the federal funds rate target at the meeting.

The FOMC is scheduled to meet again next January 30/31, 2007.