Fed Holds the Line on Rates

January 29, 2003 (PLANSPONSOR.com) - As widely expected, the Federal Reserve on Wednesday left interest rates unchanged, but warned that continued economic weakness could still be on the horizon with uncertainty looming over a possible war with Iraq.

In its brief announcement , the Federal Open Market Committee (FOMC) said it was keeping the target for the federal funds rate at 1.25%. FOMC members said risks to the economy remained evenly balanced between higher prices and a renewed downturn, a stance they adopted in November

“Oil price premiums and other aspects of geopolitical risks have reportedly fostered continued restraint on spending and hiring by businesses,” the Fed officials wrote. “However, the Committee believes that as those risks lift, as most analysts expect, the accommodative stance of monetary policy, coupled with ongoing growth in productivity, will provide support to an improving economic climate over time”

The move to hold steady on rates mirrored the Fed’s approach in December (See  Fed Steady on Interest Rates).