Federal Reserve policy-makers today kept the federal funds rate at 5.25%.
"Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices," according to a statement by the Federal Open Market Committee, which set the rate. "Readings on core inflation have been elevated in recent months, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand."
"The economy has to slow to bring inflation down to a level where the Fed is comfortable," said Dan Dektar, executive vice president and CIO of Smith Breeden Associates. "If the economy doesn't slow down, the Fed is going to raise rates. But it's the Fed's forecast, and increasingly the market (forecast), that the growth will slow."
