Washington – The Federal Reserve held interest rates steady, extending nearly a year of stability that has positives for savers and borrowers.
Fed Chairman Ben Bernanke and his central bank colleagues left an important interest rate unchanged Wednesday at 5.25 percent, where it has stood since June. The decision was unanimous.
The Fed’s decision means that commercial banks’ prime interest rate – for certain credit cards, home equity lines of credit and other loans – stays at 8.25 percent.
Borrowers had suffered through two years of rate increases. But the current period of steadiness can help them regain their footing by paying down or consolidating debt, experts said, and predictable rates can help with investment decisions.
For savers, “although rates have stabilized, they have stabilized at attractive levels,” said Greg McBride, a senior financial analyst at Bankrate.com. “They can earn in excess of 5 percent for a range of bank products from money market accounts to five-year CDs.”
On Wall Street, the Fed’s action and views about the economy gave stocks a lift.
Assessing economic conditions, Fed policymakers noted that growth slowed earlier this year and the economy is still feeling the impact of the housing slump. Fed policymakers continued to predict that the economy will expand at a “moderate pace.” The Fed also stuck to its forecast that inflation should recede over time.
Yet, it renewed its warning that underlying inflation – which excludes food and energy prices – remains “somewhat elevated.”
Policymakers once again said that their “predominant” concern is if inflation fails to moderate as expected.
The Fed’s decision to leave rates alone comes as economic growth has slowed, and inflation, while showing some improvement, is too high for the Fed’s tastes.
Economic growth slowed to a near crawl of 1.3 percent in first quarter of this year.
