Experts hooked on to Fed’s rate pause

WASHINGTON: It is looking more and more like it could be 17 and done for the Federal Reserve. There is a growing view that after 17 consecutive rate increases, the longest stretch in Fed history, the US central bank will keep rates steady for the rest of this year. Some economists are forecasting that the next Fed move will be to cut rates, possibly as early as next spring, in response to a slowing economy and falling inflation pressures.

As widely expected, Fed chairman Ben Bernanke and his colleagues held rates steady at Wednesday’s meeting, issuing a statement that was virtually identical to the one the Fed released after its August 8 meeting, the first time it paused after two years of raising rates. The action left the federal funds rate, the interest that banks charge each other, at 5.25%. That meant that banks’ prime lending rate, the benchmark for millions of consumer and business loans, will stay at 8.25%.

The vote to hold steady was 10-1 with Jeffrey Lacker, the head of the Richmond regional Fed bank, dissenting in favour of a further quarter-point hike. He had also dissented in favour of a rate hike in August. Fed officials kept the door open to further rate increases, saying as they had in August that “some inflation risks remain”. They also repeated their August view that any further rate hikes “that may be needed to address these risks” will depend on how the economy performs.