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Fed keeps US cost of borrowing unchanged


Fed keeps US cost of borrowing unchanged


As expected the Federal Reserve has kept US interest rates unchanged. It was the central bank’s first policy-setting meeting since the stock market turmoil of earlier this month. Investors are now closely studying the comments of Fed Chairman Ben Bernanke and his colleagues for clues as to what they might do next and when.

So the benchmark rate in the US remains at five and a quarter per cent as the latest minutes from the Bank of England’s Monetary Policy Committee showed they decided by eight votes to one to keep UK interest rates at the same level this month due to the financial market volatility.

The last time the rate went up in the US was June 2006 when the central bank capped a two-year, credit-tightening with its 17th consecutive quarter-point rate hike. But it remains firmly focused on inflation and has decided to keep interest rates steady at the current levels until there is firm evidence that inflation pressures are receding.

Another factor overshadowing US economic growth is the recent problems involving so-called sub-prime lenders who make loans to customers who have poor credit records. Those borrowers have been defaulting on loans in larger numbers as the higher interest rates make it more difficult to meet mortgage payments.

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