Wednesday, September 20, 2006

Fed stands pat on rates

Associated Press

WASHINGTON — The Federal Reserve left a key interest rate unchanged on Wednesday as falling energy prices helped to restrain inflation pressures.

Federal Reserve Chairman Ben Bernanke and his colleagues issued a brief announcement saying they would leave the federal funds rate, the interest that banks charge each other, at 5.25 per cent.

The decision represents a break for borrowers. It means that banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain at 8.25 per cent.

The Fed also had left rates unchanged at their last meeting in August, breaking a record string of 17 rates hikes that had driven the funds rate to its highest level in more than five years.

The decision to leave rates alone for a second time had been widely expected in financial markets, given recent favorable developments on inflation. Oil prices have fallen by more than 20 per cent over the past two months and a cooling housing market has contributed to a slowdown in overall growth.

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