The Federal Reserve left the rate banks charge each other for overnight loans at 5.25 percent Thursday, saying that despite an “ongoing adjustment in the housing sector,” the economy seems likely to continue to expand at a moderate pace.
Many companies involved in building and selling homes have hoped the Federal Reserve would lower the federal funds rate this year, which could make it cheaper for home buyers to take out mortgage loans.
But members of the Federal Reserve’s Open Market Committee have elected to leave it unchanged for the last 12 months because of worries about inflation.
If anything, some of the committee’s recent statements have emphasized that the risk of runaway inflation could necessitate a rate increase.
In a statement explaining Thursday’s unanimous decision to leave the federal funds rate unchanged, the committee acknowledged that readings on core inflation “have improved modestly in recent months.” However, the committee said, “a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.”
