Federal Reserve Holds Fed Funds Rate at 2%

Federal Reserve Holds Fed Funds Rate at 2%

The Fed stood pat on rates today, keeping the Fed Funds Rate at 2%, despite widespread turmoil on Wall Street. Weak growth is fighting inflation to a standstill within the Fed. Savings and money market rates and cd rates should remain relatively stable or even trend higher with this announcement.

The Fed stood pat on rates today, keeping the Fed Funds Rate at 2%, despite widespread turmoil on Wall Street.  Weak growth is fighting inflation to a standstill within the Fed.  Neither is able to get the upper, or lower hand and as a result, the Fed is doing the most prudent thing, and keeping rates steady.

While many thought the Fed needed to cut rates to save the stock market, most major stock indexes are on the positive side, with the Dow up 61.39 points as of 3:30 pm EST. 

Savings and money market rates and cd rates should remain relatively stable or even trend higher as banks compete more aggressively for increasingly valuable consumer deposits.

The full text of the Fed statement is below:

Sept 16, 2008

For immediate release

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.

The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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