Fed Holds Rates Steady

August 12, 2003 (PLANSPONSOR.com) - With US interest rates at a 45-year-low, Federal Reserve monetary policy-makers took a wait-and-see stance by not further monkeying with rate levels.

The Federal Open Market Committee (FOMC) announced that it was keeping the federal funds rate at 1%, saying that the rock-bottom rates can be maintained “for a considerable period”   – a high level of patience it also showed at the May FOMC gathering. Fed governors said they were more concerned about inflation going too low – deflation – than an inflationary spike.

On the up side, the FOMC members said they see positive signs in current economic data. The committee said in its statement that its willingness to drop rates 13 times since early 2001 “coupled with still-robust underlying growth in productivity, is providing important ongoing support to economic activity.”   Further, while the domestic job market is still “muted,” the FOMC said, “(consumer) spending is firming.”

Dropping the federal funds rate a quarter point in June left it the lowest it has been since 1958. The rate, charged for overnight loans between banks, had been at 1.25% since November 2002 (See   Fed Slashes Rates to Four Decade Lows).