Posted on 12/12/2006 12:15:06 PM PST by GodGunsGuts
Fed keeps rates the same for 4th time
Tue, Dec 12 2006, 19:40 GMT
http://www.afxnews.com
WASHINGTON (AFX) - The Federal Reserve kept interest rates unchanged Tuesday for the fourth straight time as worries about inflation continued to trump concerns about the slowing economy.
At its final meeting of 2006, the central bank left its target for the federal funds rate at 5.25 percent. The funds rate, the interest that banks charge each other, has been at that level since June, when the Fed raised rates for the 17th consecutive time in a two-year effort to combat rising inflation.
The decision means that banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain unchanged at 8.25 percent.
The Fed decision was approved on a 10-1 vote with Jeffrey Lacker, president of the Fed's Richmond regional bank, dissenting for a fourth time. He favored another quarter-point rate increase to strengthen the Fed's inflation fighting efforts.
The action to leave rates unchanged had been widely expected.
Economists believe the central bank could remain on hold through the first half of 2007, watching to see if its previous rate hikes do the job of slowing economic growth enough to keep inflation under control.
In its statement, the Fed continued to signal concerns about inflation, stating, "The Fed judges that some inflation risks remain." That is the phrase the Fed has been using to signal that further rate hikes are still possible unless inflation slows more.
The Fed's preferred gauge of inflation, which excludes energy and food, rose by 2.4 percent for the 12 months ending in October, still above the Fed's 1 percent to 2 percent comfort zone.
The Fed's goal is to achieve a soft landing for the economy in which growth slows enough to keep inflation under control but not so much that the country topples into a recession.
On growth, the Fed said that the economy has slowed this year reflecting a "substantial cooling of the housing market." It added the word "substantial" to describe the housing slowdown in this statement.
But the Fed remained upbeat about continued economic growth, saying, "Although recent indicators have been mixed, the economy seems likely to expand at a moderate pace over coming quarters."
After raising the funds rate to 5.25 percent in June, the longest stretch of consecutive rate increases in Fed history, the central bank passed up the chance to change rates at its meetings in August, September and October and now the December meeting, the final session of the year.
Some economists are worried that the Fed's hoped-for outcome for the economy could be jeopardized if the current significant slowdown in housing with falling sales and home prices starts to trigger cutbacks in other areas such as consumer spending.
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For more information and to contact AFX: www.afxnews.com and www.afxpress.com
ping
Plunge = down 0.12% ?
Plunge, I do not think that word means what you think it means.
As europe raises rates?
My but we are living in interesting times.
Odd reaction, since it was pretty widely believed that the Fed would not hike rates.
So much for a soft landing. A crash may be upon us sooner than Greenspan predicted. But what do I care? I live entirely off of the land and produce everything I need. Wait. No, I don't. I'm entirely dependent on the system. I'm doomed.
Rob, what do you mean? What does this mean?
The Dollar has to fall much, much farther to stem the amount that the U.S. imports.
Naturally, countries that export to us want a very different outcome.
You mean I'll get to pay back my debts with dollars that are worth less.
Cool. I'm up to my eyeballs in debt.
That's the case only if your income and assets are in other currencies. Otherwise, no help. Sorry.
Well, I googled 'plunge definition', and at the top of the first page was:
immerse: thrust or throw into; "Immerse yourself in hot water" wordnet.princeton.edu/perl/webwn
I think it's fair to say that the US dollar is afloat in some pretty warm water! ;^)
Yes we do. Especially when you have the recently former FED chairman running around the world saying the dollar will fall, and that we should all diversify into other currencies. Very interesting times indeed.
LOL--the dollar has been devastated.
Greenspan also warned stocks were getting ahead of themselves when the Dow was below 7,000. You didn't listen to him then, did you?
It's actually kinda wierd. I think it is his response to those that are saying he caused all the problems we are having and are about to have. Yet he seems to be, at the same time, predicting them.
I guess when you have wielded that kind of power it's hard to just get a boat and a fishing pole and butt out of everyone elses business.
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