Archive for Wednesday, December 11, 2002

Federal Reserve keeps interest rates steady

December 11, 2002


— The Federal Reserve, noting encouraging signs that the economy is working through a "soft spot," left interest rates unchanged Tuesday and signaled that November's rate cut may turn out to be the last one needed for recovery.

The Fed decision to leave its benchmark for overnight bank loans at a 41-year low of 1.25 percent means that Americans will be able to keep borrowing at the lowest interest rates in decades.

Because of the Fed decision, banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain at 4.25 percent, its lowest point since May 1959.

The central bank struck a more positive tone in the brief statement announcing its decision than in November when it had cited rising concerns about economic weakness stemming from increased "geopolitical risks" of a possible war with Iraq.

In Tuesday's statement, the Fed said economic signs since then "are not inconsistent with the economy working its way through its current soft spot."

The central bank expressed the belief that the already low level of interest rates, coupled with continued strong gains in U.S. workers' productivity, was laying the groundwork for a sustainable economic rebound.

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