Fed Panel Decides To Leave Rates Alone

Uncertain of the ultimate impact of Asian financial turmoil, Federal Reserve policy-makers opted Wednesday for no change in short-term interest rates.

The central bank’s monetary policy panel - the Federal Open Market Committee - concluded a two-day, closed-door meeting by leaving the benchmark rate on overnight loans between banks at 5.5 percent.

It’s been at that level since last March, when policy-makers nudged it a quarter percentage point higher, expressing concern that robust economic demand would spur increased inflation.

The decision to hold steady had been widely anticipated and financial markets showed little reaction.

Economists said it leaves short-term rates as a mild brake on the American economy, which last year grew at its most robust pace in nine years.

“Even though they haven’t raised rates, lower inflation has raised real (inflation-adjusted) rates,” said economist David Wyss of DRI-McGraw Hill in Lexington, Mass. “That is slightly slowing the economy, not that the economy is noticing it much because the economy is very strong.”