Fed Keeps Interest Rate Unchanged

Central Bank Acknowledges Increased Market Strains But Leaves Key Rate At 2%

(AP)  The Federal Reserve kept a key interest rate unchanged Tuesday, saying that strains in financial markets have "increased significantly" but that it would keep an eye on them and act, if needed.

The central bank said it was keeping its target for the federal funds rate, the interest that banks charge on overnight loans, unchanged at 2 percent.

Some investors had hoped the Fed would cut rates after financial markets were stunned by investment bank Lehman Brothers' failure over the weekend to find financing or a buyer.

In a statement, the Fed said "strains in financial markets have increased significantly and labor markets have weakened further."

The central bank said it also remained concerned about inflation pressures, however.

The Fed said it would closely monitor economic developments going forward and would be prepared to "act as needed to promote sustainable economic growth and price stability."

Many private economists had expected the Fed would leave interest rates unchanged, but would signal the possibility of further rate cuts by hinting that market turmoil had tilted the balance of risks to weaker growth and away from the threat of inflation.

"The downside risks to growth and the upside risks to inflation are both of significant concern to the committee," the Fed officials said.

"I just don't think this is a realistic statement on the part of the Fed," said David Jones, head of DMJ Advisors in Denver. "It is clear that the downside risks to growth outweigh the risks of inflation."

If the market turmoil and other forces hitting the economy result in weaker growth than the Fed is expecting at the moment, Jones said he still believed the central bank will implement two quarter-point rate cuts before the end of the year.

The Fed's decision to leave rates unchanged came on a day when it moved aggressively to bolster confidence by injecting $70 billion in extra reserves into the financial system. The Fed did that during its normal open market operations which are handled by the Fed's New York regional bank.

The Fed's decision was supported by a unanimous vote.

[lewiston14]

2% is not that big a deal. Its all the feds have left to bargain with and thats not much. Dropping it to 0 will not change a thing so there is no need for a fed central bank in the first place if I understand what the central bank does. I dont think I do understand. Sounds like a another middle man leech.
Off topic:
Russia stock tanks 17%
EU gas and oil prices go up 17%
End of story
Back on topic:
We spend way more then we bring in but its hard to bring anything in when everything was sent or sold overseas. Big companies will feel the pain last but make no mistake they will feel it in a big way soon enough when there is nothing left to buy the things they sell and 2% will not change a thing.

[ender18-2009]

FYI, low interest rates = MORE AND MORE INFLATION. We are doomed. A temporary fix that will only continue to weaken the dollar. If we need to bailout these companies, we should go seize the assets of the company executives and use their illgotten money to prop up the failing economy.

[bobnjersey]

[skyk is over 50 years old folks....hard to believe i know]
[Posted by jamesm12341 at 08:49 AM : Sep 16, 2008]

how old are you ... 12?

[antoniof123]

The Russian stock market crashed today - down 17%!

World investors are learning that Russia is too much of a risk.

That will teach Putin to invade his neighbors.

Posted by OneAmerican6 at 03:51 PM : Sep 16, 2008

OneAmerican6 what does this have to do with the key interest rate set by the Fed. Can you explain yourself or did you read another story line and just got lost.

[vancouverboo]

Hacker 11011, the problem for the US is that on an open field with unlimited international free competition, the US loses. We''ve been losing (having a negative trade balance) since the 70s. We''ve been losing consistently for 40 years and we are losing bigger now that ever before. We are the world''s losers. So we''re tired of your talk of free trade and international competition. We''re down to national survival now and it''s time to look after ourselves rather than looking after the few rich among us who are making a bundle on our economic demise.

[trillion1]

Years ago I read antiques and collectables were your most solid investment. Yes, they can lose their value depending on trends, but if you do your research, buy what you like and can afford you should come out ahead. Unlike 401Ks you pick what you want not some stranger and unlike stocks you have a physical object you can enjoy. I even save pre 1980 pennies.

[antoniof123]

The Fed holds key interest rate no change.

Until next week when AIG fails right Ben.

[simplemind2]

I noticed that the constant flurry mail attack that stated "Dear sir, you''ve been pre-approved for this credit card..." has
all of a sudden either slow-down or subsided somehow.
Those CC institutions fail to understand person like me only have a fixed amount of spending fund.
I used CC vs cash purely for convenience.
When the CC statement arrives, I always pay the debt in full, thus I never need to worry about the interest - be it 10% or 50%.
The important lesson I learned in life is live within my own means.
Since I diversified my investment, even the Wall-Street 100% goes into bust, no one will see me twinge.
However with today''s economy, good-paying job is scarce, pay-raise that matches with cost of living is rare, quite a few
seniors living on Social Security benefits are barely surviving. My personal opinion about solving the economic down-turn
is the interest rate should go higher so that more folks will save their money and gain interests.
The fact of the matter is even you lower the interest rate to 0%, the uneducated or greedy populace will still either can''t afford or suffer loss at the end.

[oldpoet-2009]

If you don''''t understand investing, you should not be in the market.

Posted by Xyno

-------------------------

You''re the one who doesn''t understand Xyno. People with 401k''s have no choice, it''s most often the ONLY option they have for a retirement plan. And many 401''s limit the investment choices, so we''re stuck.

[xyno-2009]

Don''''t know about you, but my vanguard 401k (privatized account) has lost everything I put into it since march 08 plus $1500 in it''''s value.

So much for a "Privatized" account doing better...

Posted by jtdev1 at 02:58 PM : Sep 16, 2008

===========

If you don''t understand investing, you should not be in the market.