Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, September 27, 1995 TAG: 9509270046
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Bloomberg Business News
DATELINE: WASHINGTON LENGTH: Medium
Federal Reserve policy-makers decided against lowering U.S. interest rates Tuesday, signaling that they're content to let the economy expand at a slow pace as a way of keeping inflation under control.
The Fed's inaction for the second consecutive Federal Open Market Committee meeting had been widely expected by Wall Street economists, who said the central bank succeeded in squelching a small rise in the inflation rate earlier this year without triggering a recession.
``Why rock the boat?'' said Lyle Gramley, a consulting economist at the Mortgage Bankers Association of America and former member of the Fed. ``This is a wonderful situation.''
The decision leaves unchanged the rate on overnight bank loans at 5.75 percent. The more symbolic discount rate on loans to banks from the Federal Reserve system also holds steady at 5.25 percent.
The focus now turns to whether the Fed will cut rates at the next Open Market Committee meeting Nov. 15 - or whether Chairman Alan Greenspan will use the authority likely granted by the committee and lower interest rates on his own before then. For either of those things to happen, though, the economy would have to show new signs of weakness.
In fact, if the economy continues to perk up, Wall Street may start looking for a rate increase, said Robert Dederick, an economic consultant at the Northern Trust Co., in Chicago. As of now, a rate reduction in November ``is no way in the bag,'' Dederick said.
By influencing the interest rates it controls, the Fed's actions translate into lower or higher borrowing costs on everything from home mortgages to business loans. Most banks cut their prime lending rate, charged their best corporate customers, a quarter point to 8.75 percent after the Fed reduced the fed funds rate by a similar amount in July.
by CNB