Fed Leaves Interest Rate Unchanged

WASHINGTON (AP) -- The Federal Reserve left a key interest rate unchanged on Wednesday while taking note of the recent weaker economic performance and higher inflation pressures.

The central bank voted to leave the federal funds rate, the interest that banks charge each other, at 5.25 percent. It marked the sixth straight meeting in which the Fed has kept the rate the same.

As it has at previous meetings, the Fed said it was more worried about the risk of inflation than weak economic growth. But this time it dropped language that talked solely about the possibility that interest rates would be increased in the future.

Economists believe it is highly unlikely that the Fed will boost rates in coming months, given troubles in the housing industry and sluggish economic growth.

The market turmoil, which included a 416-point drop in the Dow Jones industrial average on Feb. 27, was triggered in part by troubles in the mortgage lending industry and worries that recession risks were increasing.

The Fed took note of the weaker readings on the economy, saying, "Recent indicators have been mixed and the adjustment of the housing sector is on-going."

But the Fed retained language it has used in past statements, expressing the belief that the economy will keep growing at a moderate pace in coming months.

Copyright 2007 The Associated Press. All rights reserved.

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