ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, August 21, 1996 TAG: 9608210029
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Federal Reserve policy-makers left interest rates unchanged Tuesday, apparently unable to find persuasive evidence the economy was growing so strongly that it threatened higher inflation.
``There was no compelling reason why it should have changed policy,'' said economist Mark Zandi of Regional Financial Associates of West Chester, Pa. ``The economy has slowed from its torrid second-quarter pace and inflation is under control.''
The Fed generally does not explain its decisions and in the case of the Federal Open Market Committee's decision, it merely reported the FOMC meeting had ended and said there would be no further announcement - a signal it had not changed interest-rate policy.
Many analysts believe the central bank will continue to hold rates steady at least until after the Nov. 5 election and perhaps through the remainder of the year. The FOMC next meets on Sept. 24 and then not until Nov.13.
``The economy is slowing down,'' explained economist Bruce Steinberg of Merrill Lynch & Co. in New York. ``It grew a little too fast in the first half of the year, but not now. And inflation is not a problem.''
Although inflation appears under control now, some analysts express concern the low 5.4 percent unemployment rate has created a tight labor market that could push wages up and spark the next bout of price increases.
But Steinberg said wage demand so far remains subdued and that ``as the economy slows, job growth will slow sufficiently to keep wage pressures in check.''
The FOMC has not raised rates since February 1995, when it boosted the federal funds rate to 6 percent from 5.50 percent, the last of seven rate increases designed to slow the economy and prevent any inflationary spurt.
LENGTH: Short : 41 linesby CNB