Fed Funds Rate unchanged at 5.25%
10 May 2007
10.05.07
In line with market expectations, the Federal Reserve elected to keep the Fed Funds Rate unchanged at 5.25% at yesterdays meeting.
Once again, the focus was on the accompanying statement where the headline indicated that the Fed remains concerned that inflationary pressures will fail to moderate. Furthermore, while previous statements have highlighted ‘mixed’ economic conditions, this time they stated that economic growth slowed in the first quarter of 2007. They also note that the adjustment in housing is ongoing, however, they anticipate the economy will expand at a moderate pace over the coming quarters.
The statement is largely unchanged in tone from previous statements and as such, leaves the Fed in a neutral stance. We continue to feel that rates will remain unchanged throughout the remainder of 2007 although note that the money markets are pricing in a cut before year end.
(Research Desk - Ben Parkinson)