Wednesday, January 31, 2007

Fed Keep Interest Rates Unchanged as of January 31, 2007

By MARTIN CRUTSINGERAP Economics Writer

WASHINGTON (AP) -- The Federal Reserve, faced with a strongly rebounding economy, left interest rates unchanged on Wednesday while repeating concerns about inflation.
The central bank voted to leave the federal funds rate, the interest that banks charge each other, at 5.25 percent, where it has been since last June.

That decision had been widely expected given an economy that is exhibiting better-than-expected growth. While the Fed had been expected to start cutting rates later this year, economists are now worried that the central bank may feel the need to resume raising rates for fear that inflation pressures will not keep easing.

The rate action was supported by a unanimous 11-0 vote of the Federal Open Market Committee, the panel of Fed board members in Washington and regional bank presidents who meet eight times a year to set interest rates.

At the previous four meetings, Jeffrey Lacker, the president of the Richmond Fed regional bank, had dissented in favor of a further boost in rates. However, he is not a voting member of the FOMC this year.

The action means that banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain unchanged at 8.25 percent.

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