Federal Reserve leaves interest rates unchanged
The U.S. Federal Reserve on Wednesday did what economists had been predicting and left a key interest rate unchanged as it shifted its focus to inflation control from economic growth.
The U.S. central bank's decision to hold the line ended a string of seven interest rate cuts dating back to Aug. 7, 2007. During that span, the Fed cut the federal funds rate to two per cent, down from 5.25 per cent. The Fed said it expects inflation to moderate later in 2008 and 2009.
"However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high," the Fed cautioned.
The Fed decision comes a day after Tuesday's weak reading on U.S. consumer confidence. The Conference Board's consumer confidence index dipped to 50.4 for June, making it the lowest reading since February 1992.
The index reading indicates "the economy remains stuck in low gear," according to Lynn Franco, the Conference Board's director of consumer research.
The Bank of Canada has made a similar shift to controlling inflation from spurring the economy. On June 10, the Bank of Canada surprised most market watchers by leaving the overnight rate unchanged. Economists had been predicting a rate cut.
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