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US borrowing costs unchanged


US borrowing costs unchanged


The US Federal Reserve has kept interest rates unchanged after examining the health of the US economy. Fed Chairman Ben Bernanke had the usual difficult choice whether to cut the cost of borrowing to stop the country sliding further into recession or to put up rates to counter inflation.

Several members of the Fed’s Open Market Committee have recently spoken out in favour of higher rates, but Bernanke’s wait and see policy prevailed and for the moment US interest rates remain on hold at 2%.

The problem for the policy makers is that one year after the US housing bubble burst in the subprime mortgage meltdown there is still no sign of a recovery in US property market. Recent figures showed home prices in 20 metropolitan areas had fallen 15.8% from a year earlier.

But there was good news on the inflation front for the Fed; as it met, oil prices – which hit record highs three weeks ago – fell to their lowest in three months and US petrol is now at its cheapest in 11 weeks.

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