Federal Reserve Holds Steady on Interest Rate

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The Federal Reserve's interest rate policymakers met and, once again, decided to leave a key interest rate alone. Short-term interest rates will remain at 5.25 percent.


The business news starts with something that didn't change: interest rates. Policymakers at the Federal Reserve have decided once again to leave well enough alone. The Fed's key short-term interest rate remains at five and a quarter percent. Fed officials said inflation pressures have eased, although they expect growth to continue at a moderate pace. The Fed's decision comes in spite of more signs of a slowdown in the housing market.

NPR's Jim Zarroli reports.

JIM ZARROLI: It was the third straight time that said policy makers made no change in rates. In a statement released after the meeting, they said inflation pressures are still elevated, but are likely to ease. That's because energy prices have fallen so much, and because previous interest rate increases have restrained spending.

Richmond Federal Reserve bank President Jeffrey Lacker dissented from the vote for the third straight time. Minutes from the last meeting suggest that Lacker is concerned that core inflation rates are still too high, and that another rate hike is needed. The Fed raised rates 17 times over a two and a half year period ending in June. The rate increases have pushed mortgage rates up, especially on adjustable rate loans, and that's already squeezed the nation's housing market.

This morning, the Commerce Department reported that the median price of a single-family home fell 9.3 percent between August and September. It was the biggest one-month drop since 1970. Sales of new homes were down 14.2 percent from September 2005. Yesterday, the National Association of Realtors reported that new home sales fell in September for a sixth straight month.

Jim Zarroli, NPR News, New York.

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