Fed Leaves Interest Rates Unchanged

The Federal Reserve decided this week to keep interest rates at record lows. The target interest rate remains near zero. The decision is aimed at helping the economy recovery.

One member of the Fed, Thomas Hoenig, voted against the action. A statement by the Fed said that Hoenig ”believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.” Hoenig is president of the Federal Reserve Bank of Kansas City.

The Fed said the economy is continuing to strengthen. Household spending is improving but “remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.” However, business spending on equipment and software seems to be improving.

Also, the Senate backed Ben Bernanke in a 70-30 vote for a second term as chairman of the central bank. Bernanke’s future as the head of the Federal Reserve was shaky due to opposition from lawmakers fed up with big banks and regulators.

“The politically neutral and independent Fed has really been politicized this week, probably to its detriment,” Chris Krueger of Concept Capital, a private firm that tracks Washington for institutional investors, told the New York Times.

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