Fed Rate Holding Game Continues

December 9, 2003 (PLANSPONSOR.com) - Faced with an albeit slowly recovering economy, Federal Reserve officials decided Tuesday not to disturb the interest-rate picture

The Federal Open Market Committee (FOMC) decided to keep the federal funds rate at 1%.

As they have in past meetings (See Fed Holds Steady on Rates ), 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.

FOMC officials said the growth in productivity was “robust,” economic output is expanding “briskly,” and the labor market is enjoying a “modest” improvement.  

Also extra low inflation – or “deflation” – isn’t as much of problem as it has been in recent months, the Fed said, and inflation is still muted. All in all, the FOMC continued to assert that it could avoid any rate hikes for a long while.

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