Fed Holds Interest Rates Steady at Record Low

Top officials of the U.S. central bank kept the key interest rate steady at a record low, near zero, where is has been since 2008.

Wednesday’s decision to leave rates unchanged for the time being follows two days of meetings on interest rate policy. A note from the Fed says the pace of job creation has slowed, but U.S. unemployment remains low.

The Fed tries to steer the economy toward full employment and stable prices. That is why the Fed slashed interest rates during the financial crisis when unemployment rose to 10 percent. The idea was to boost economic growth by making it easier for businesses to borrow money to build new facilities and hire people, and to make it less expensive for families to afford to buy homes.

Now that unemployment has fallen to 5.1 percent, officials are worried about inflation that is so low it threatens to drop into a cycle of falling prices and wages called deflation that could dry up demand and hurt the economy.

A rate increase would tend to boost inflation closer to the Fed's two percent target rate, which officials say is part of a manageable and healthy economy.
Some recent reports have pointed to slowing growth in the United States, while some foreign economies are seeing weak growth. However, analysts at PNC Bank say the Fed statement showed fewer concerns about weakness in the international economy. The level of foreign demand affects U.S. exports and economic growth.

Bankrate.com chief analyst Greg McBride tells VOA if the Fed sees stronger economic data over the next six weeks, Fed officials are likely to raise rates at their next meeting in December.