Fed Holds Fed Funds Rate At 5.25%

Oct. 25, 2006
Says U.S. economy is likely to expand "at a moderate pace."

By a vote of 10 to 1, the Federal Open Market Committee (FOMC) voted Oct. 25 to keep the federal funds target rate at 5.25%. The holding action was widely anticipated and is the third time in as many meetings that the panel has held the line.

The federal funds rate is the interest banks charge each other on overnight loans.

The FOMC noted that core inflation levels have been elevated and high levels of resource utilization could sustain inflationary presses. "However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand," the panel said.

Jeffrey M. Lacker was the sole panel member to vote against hold the target rate at 5.25%. He wanted it raised to 5.5%.

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