Fed Holds Steady on Rates

October 28, 2003 (PLANSPONSOR.com) - The US Federal Reserve's Federal Open Market Committee (FOMC) is keeping its hand on the economy's throttle, but still not revving up the engines.

In its customary post-meeting statement, the FOMC announced Tuesday that it was keeping its target for the federal funds rate at 1%.

As they have in past meetings, committee members asserted Tuesday that the best chance for a sustainable US recovery was a continued “accommodative stance” on monetary policy on their part along with more time for the economy to keep getting stronger. “The evidence accumulated (since the previous FOMC session) confirms that spending is firming, and the labor market appears to be stabilizing,” the FOMC said.

Finally, the FOMC repeated its concern the extra low inflation – or “deflation” – is the economy’s biggest potential issue in coming months. With this overall economic approach, the FOMC said once again that it can keep interest rates low for the foreseeable future.

Changes in interest rates are of concern to plan sponsors because of their effect on the Prime Rate – a frequent benchmark for retirement plan loans.