Saying worries about inflation outweigh the ongoing “adjustment in the housing sector,” the Federal Reserve’s Open Market Committee said Wednesday it is keeping the short-term federal funds rate at 5.25 percent.
The rate banks charge each other for overnight loans has been unchanged since June, when the committee approved the last of 17 straight 25-basis-point increases.
Some economists have predicted the Fed would lower short-term rates in 2007 to ward off the threat of a recession. But for now, the economy seems likely to continue to expand at a moderate pace, the Committee members said in a statement, and their predominant concern “remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”
The committee is scheduled to meet again May 9.