Interest rates steady... another Fed´s "move"

Federal Reserve policymakers left interest rates unchanged Wednesday for a second straight meeting, as a sharp drop in oil prices helped ease inflation concerns.

The central bank left the benchmark overnight lending rate at 5.25 percent, exactly where it has been since June 29, when the Fed halted a two-year stretch of 17 consecutive rate hikes.
The long rate-hike campaign was intended to keep the economy from overheating and sparking a damaging run-up in inflation. But with the economy showing clear signs of slowing, and energy prices plummeting, Fed Chairman Ben Bernanke and his colleagues have gotten some major breathing room in their effort to keep inflation contained.

Traders and analysts looked for some insight into the Fed’s next move by reading the tea leaves of the Fed’s comments on Wednesday’s decision.

The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.

Extract from the Fed’s Open Market Committee' statement.

The group cautioned that some inflation risks remain, noting that readings on core inflation have been elevated, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures.
But it said that 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.

As for future rate changes, the FOMC said the extent and timing of those moves “will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”