Fed to keep federal funds rate unchanged

The Federal Reserve said it will keep the target range for the federal funds rate at 0 to 1/4 percent. The lack of movement in the interest rate is designed to promote an economic recovery and keep inflation in check.

The Fed said in a statement that “the Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”

Economic growth has been slower than expected this year, according to the Fed, which said, “Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed.”

The federal funds rate is the interest rate at which depository institutions lend money to each other, usually overnight. With the federal funds rate remaining unchanged it’s likely that you won’t see much upward movement in savings rates. That’s because savings rates move in the same direction as the federal funds rate. So when the rate is increased, your savings rate also should rise.

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