Washington – The Federal Reserve is expected to leave interest rates unchanged today for a second straight month, and many analysts now think there won’t be any more rate increases this year.
If true, that’s good news for consumers, because the Fed’s increases in the benchmark federal funds rate, an overnight rate that banks charge each other, influence a broad array of bank loans to consumers and businesses.
Falling oil and gasoline prices, along with a steeper-than-expected drop in new housing starts, are combining to reduce inflationary pressures that push up prices throughout the economy. The Fed’s main job is to keep inflation in check. It now appears that the Fed’s pause last month, which left the federal funds rate at 5.25 percent after 17 consecutive quarter-point rate raises, may have ended the credit-tightening cycle that began in June 2004.
“I think we’ve probably seen the peak in terms of the Fed tightening. I think the economy will be soft enough for the second half of the year that over time it will help curb inflationary pressures,” said Martin Regalia, chief economist of the U.S. Chamber of Commerce and former Fed staffer.
