While acknowledging that “credit conditions have become tighter for some households and businesses” as financial markets react to upheaval in the mortgage lending industry, Federal Reserve officials aren’t ready to slash the federal funds rate.

The Federal Reserve’s Open Market Committee voted unanimously Tuesday to leave the key short-term rate at 5.25 percent, saying worries about inflation continue to trump the potential impact of the downturn in the housing market. A statement issued by the committee gave no indication that problems in mortgage lending have shaken that conviction.

The Fed’s “predominant policy concern” remains the risk that inflation will fail to moderate as expected, the statement said. “Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.”

Although readings on core inflation have improved “modestly” in recent months, there’s no convincing evidence of a sustained moderation in inflationary pressures, the statement said. High levels of resource utilization have the potential to sustain inflationary pressures.

“Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing,” the committee said. “Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.”

Many housing industry leaders are hoping the Fed will cut the federal funds rate — the rate banks charge each other to lend money overnight — to encourage borrowing. The committee will meet three more times this year, with the next meeting scheduled for Sept. 18.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top
The Connect Expo: Explore the Latest Business ToolsCHECK IT OUT×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription