FOMC leaves interest rates unchanged at 2.00%
17 September 2008
The Federal Reserve elected to keep interest rates unchanged on Tuesday, opting instead to soothe financial markets with Central Bank lending facilities rather than further monetary policy easing. The Fed Funds rate remained at 2.00% and the discount rate at 2.25%, confounding some expectations for a rate cut in order to revive the US financial sector after the collapse of Lehman Brothers.
In its accompanying statement, the Fed said it viewed growth and inflation as “both of significant concern” and was monitoring financial developments “carefully” – a stance that keeps open the option of a rate cut in the coming weeks, but does not offer any predisposition to ease. “Strains in the financial markets have increased significantly and labour markets have weakened further” the Fed said. “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” it added.
However, the Central Bank said that already-low rates and steps it has taken to ease funding strains in credit markets should help to promote growth over time.