Federal Reserve Holds Key Rate Steady

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In the wake of economic crisis, the Federal Reserve voted yesterday to keep the federal funds target rate at 2 percent, where it has been since April. This rate influences mortgage rates, which have been sliding since the bailout of Fannie Mae and Freddie Mac.“Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters,” the Fed said in its post-meeting statement.

“The Fed’s non-action suggests that things might have reached a bottom,” says Richard Yamarone, Argus Research’s director of economic research. “But that is not to say that we’re out of the woods yet.”

The odds for a quarter-point cut at its Oct. 29 meeting fell sharply. “The Fed is holding firmly to keeping rates steady, but the chances of a rate cut have been put back on the table, especially if growth in the fourth quarter appears to be slowing,” says Stuart Hoffman, chief economist at PNC Financial Services Group.

Source: Investor’s Business Daily, Brad Kelly (09/16/2008)

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