Wednesday, September 20, 2006

Fed Keeps Rates Stable Amid Signs of Cooling

The Federal Reserve gave America's borrowers a break and held interest rates steady for a second straight month, part of a strategy to put the economy and inflation on an even keel.

In a 10-1 vote Wednesday, Fed Chairman Ben Bernanke and his colleagues decided to leave rates alone, suggesting that slowing economic activity eventually will lessen inflationary pressures.

With economic growth moderating and once-surging energy prices now receding, all but one of the Fed's voting members felt comfortable holding a key interest rate at 5.25 %. That meant commercial banks' prime interest rate for certain credit cards, home equity lines of credit and other loans would stay at 8.25 %.

The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.

The Fed's goal is for the economy to slow enough to reduce pressures from inflation, but not so much that it would risk falling into recession. The wild cards are energy prices and the cooling in the housing market after a five-year boom.


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