Fed starts policy meeting, rates seen on hold
The U.S. Federal Reserve began a two-day policy meeting on Tuesday that was expected to end with benchmark interest rates on hold and little evidence the central bank is going to raise borrowing costs soon.
The Fed began its policy-setting meeting at around 2 p.m. EDT as scheduled, an official said. A decision on rates is expected to be announced about 2:15 p.m. EDT on Wednesday.
Fed Chairman Ben Bernanke and his colleagues confront a deepening housing market slump that looks set to be a drag on growth for months to come, and surging oil and commodity prices that threaten to ignite broader inflation.
While inflation risks have edged up and the economy has seemingly steered clear of the risk of a deep recession, policy-makers at the central bank have not fully set aside concerns about economic weakness.
The U.S. central bank lowered the interbank federal funds target rate to 2 percent at its last meeting on April 29-30, and has indicated it hopes rate reductions of 3.25 percentage points since mid-September will suffice to help the economy recover from the housing collapse and credit crunch.
“For now, policy seems well positioned to promote moderate growth and price stability,” Bernanke said on June 3.
Fed officials are in a bind bad credit payday advance. Raising interest rates to quell inflation would put a further brake on an already weak economy, while more rate reductions to buffer against a further stumble in output could add to price pressures.
Recent data highlights that dilemma. U.S. consumer sentiment slid to a 16-year low in June, while house prices continued their downward slide, reports showed on Tuesday.