Industry News

Fed holds key interest rate at 5.25%

'Substantial' cooling of housing market moderating inflationary pressures

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The Federal Reserve left the federal funds rate at 5.25 percent Tuesday, saying that inflation pressures seem likely to moderate over time in part because of a "substantial cooling of the housing market." It was the first time the Federal Reserve's Open Market Committee used the word "substantial" to describe the current housing slowdown. "Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures," the Committee said in a statement explaining its decision to keep the key short-term interest rate unchanged. The decision keeps the prime lending rate offered by banks at 8.25 percent. 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," the Committee's statement said. The Committee had raised interest rates by 25 basis ...