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Last updated at: (Beijing Time) Wednesday, August 13, 2003

US Fed Keeps Key Short-term Rate Unchanged

The US Federal Reserve (Fed) decided Tuesday to hold a key US short-term interest rate unchanged at 1 percent, the lowest level in 45 years.


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The US Federal Reserve (Fed) decided Tuesday to hold a key US short-term interest rate unchanged at 1 percent, the lowest level in 45 years.

The Federal Open Market Committee (FOMC), the US Fed's policy-making body, made a unanimous decision to keep the federal funds rate unchanged after a close-door meeting. The rate is the interest which banks charge each other on overnight loans and is the Fed's primary tool for influencing economic activity.

The Fed said in a statement that currently low short-term interest rates is "providing important ongoing support to economic activity."

"The evidence accumulated over the intermeeting period shows that spending is firming, although labor market indicators are mixed," it said. "Business pricing power and increases in core consumer prices remain muted."

"On balance, the risk of inflation becoming undesirably low is likely to be the predominant concern for the foreseeable future," the statement said.

Holding the funds rate steady means that US commercial banks' prime lending rate for many short-term consumer and business loans,will remain at 4 percent, the lowest level since 1959.

US economy is showing signs of accelerating in past weeks and many analysts said the US economic recovery will speed up in the second half of this year.

The US Fed cut the federal funds rate at the end of June to spur the economy which was sluggish at the end of last year and inthe first half of this year.


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