Fed Holds Rate Steady as Inflation Worries Rise

Wall Street Journal (06/26/08) P. A1; Reddy, Sudeep
The Federal Reserve on June 25 ended its aggressive campaign of interest rate cuts, holding its target for the federal-funds rate—charged on overnight loans between banks—at 2 percent. The decision to stand pat contrasts with recent actions by numerous central banks overseas that have begun hiking interest rates amid inflation concerns. The Fed's move to keep rates in a holding pattern could prevent mortgage rates from rising further and help attract home buyers to the market. U.S. house prices are down nearly 18 percent from their July 2006 peak, inventories are still high and industry observers say new-home construction is likely to fall further before the market returns to a balanced state.