ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, November 14, 1996 TAG: 9611140043
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
The Federal Reserve, encouraged by fresh evidence that inflation is not a threat, left interest rates unchanged Wednesday. That continued a pattern of watchful inaction that economists said could last for many months.
The Federal Open Market Committee, which sets interest rates for the central bank, announced the steady-policy stance after 3 1/2 hours of discussion.
``The Fed has hit the jackpot in terms of producing what it has been trying to achieve,'' said David Jones, chief economist at Aubrey G. Lanston & Co. in New York. ``We have a soft landing in which economic growth has slowed to a sustained, non-inflationary pace.''
The central bank last changed policy on Jan. 31 when it cut its federal funds rate, the interest that banks charge each other, to 5.25 percent in an effort to keep the economy from dipping into a recession.
When growth revived strongly in the spring, helping to push the unemployment rate to a seven-year low of 5.2 percent in August, many economists started forecasting an increase in interest rates to slow business activity before wage and price pressures got out of hand.
Speculation about a rate increase hit a peak at the Fed's last meeting on Sept. 24 following an unusual leak that showed eight out of 12 Fed regional bank presidents had petitioned for a rate increase.
However, the central bank did not raise rates at the September meeting and since that time there has been a string of reports showing that economic growth has slowed from the 4.7 percent clip in the spring to a much more sedate 2.2 percent rate in the July-September quarter.
Analysts said they expected growth to remain at that level for some time to come, which would meet Fed needs to slow growth enough to keep demand for labor or products from pushing up prices.
LENGTH: Short : 43 linesby CNB