Federal Reserve Holds Line on Interest Rates

From Times Staff and Wire Reports

Federal Reserve policymakers left short-term interest rates unchanged Tuesday, and also indicated they are neutral on their outlook for rates--meaning they are just as likely to tighten credit as loosen it in the future.

The central bank’s meeting was a yawner for Wall Street because most economists had anticipated that the Fed would take no action.

Faced with a strong U.S. economy but few signs of inflationary pressures and a still dicey situation in many foreign economies, leaving well enough alone makes perfect sense to Fed Chairman Alan Greenspan, experts said.


The Fed has held its benchmark short-term interest rate, the federal funds rate, at 4.75% since November. It had cut that rate from 5.5% in three installments starting in late September, amid severe global market fallout from Russia’s economic crisis.

The only drama leading into Tuesday’s meeting was whether the Fed might send a warning to Wall Street--where blue-chip stocks continue to soar--that it was adopting a “bias” toward tighter credit down the road.

But the Fed’s announcement after a 3 1/2-hour meeting made no mention of a change in its bias, which has been neutral since November.

“As long as the economy is growing at a fast rate, without inflation, there is no reason to apply the brakes or hit the gas,” said economist Norman Robertson of Smithfield Trust Co. in Pittsburgh.

“For now, the Fed is in the pleasant position of having to do nothing.”