*EPF318 01/29/2003
Text: Federal Reserve Leaves Key Interest Rate Unchanged
(Risks for expansion, inflation about balanced, FOMC says) (320)

The policy-making group of the Federal Reserve has voted to leave its key target for interest rates unchanged at 1.25 percent.

At the conclusion of its January 28-29 meeting, the Federal Open Market Committee (FOMC) issued a statement on the decision to keep the federal funds rate, the rate banks charge each other for overnight loans, at the lowest level in 41 years.

As the U.S. economy weakened, the Federal Reserve cuts interest rates 12 times starting in January 2001. The FOMC said that it now views the long-run risks to the economy about evenly balanced between sustaining expansion and containing inflation.

It cited analysts' predictions that conditions now restraining expansion -- high oil prices and "geopolitical risks," an oblique reference to possible war with Iraq -- would recede in time.

Following is the text of the statement:

(begin text)

The Federal Open Market Committee decided today to keep its target for the federal funds rate unchanged at 1-1/4 percent.

Oil price premiums and other aspects of geopolitical risks have reportedly fostered continued restraint on spending and hiring by businesses. However, the Committee believes that as those risks lift, as most analysts expect, the accommodative stance of monetary policy, coupled with ongoing growth in productivity, will provide support to an improving economic climate over time.

In these circumstances, the Committee believes that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are balanced with respect to the prospects for both goals for the foreseeable future.

Voting for the FOMC monetary policy action were Alan Greenspan, Chairman; William J. McDonough, Vice Chairman; Ben S. Bernanke, Susan S. Bies; J. Alfred Broaddus, Jr.; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson, and Robert T. Parry.

(end text)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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