FOMC Leaves Fed Funds Rate At 5.25%

Dec. 12, 2006
Moderate economic expansion foreseen.

As widely expected, the Federal Open Market Committee (FOMC) left the federal funds target rate at 5.25%.

"Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures," the Federal Reserve panel noted in a statement. "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 FOMC added.

Of the 11 FOMC members voting, only Jeffrey M. Lacker dissented; he wanted a 25-basis-point increase in the rate to 5.5%.

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

David A. Rosenberg, North American economist at Merrill Lynch & Co., New York, believes the FOMC will cut the federal funds rate at its second meeting of 2007, on March 21.

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