*EPF304 01/30/2002
Text: Federal Reserve Holds Interest Rates Steady
(FOMC cites more promising outlook for economic recovery) (340)

The Federal Reserve has announced it left a key interest rate unchanged ending a 12-month period of uninterrupted monetary relaxation.

In a January 30 statement the Federal Open Market Committee (FOMC), the policy-setting body of the U.S. central bank, said that it decided to keep the federal funds rate at 1.75 percent.

Last year the Federal Reserve made 11 consecutive rate cuts that left the federal funds rate, the interest rate banks charge each other for overnight loans, at the lowest level in four decades.

The FOMC said that signs of growing demand and stabilizing economic activity "have become more prevalent."

"With the forces restraining the economy starting to diminish, and with the long-term prospects for productivity growth remaining favorable and monetary policy accommodative, the outlook for economic recovery has become more promising," it said.

But citing uncertainty about "the degree of any strength" in business capital and consumer spending, FOMC members said that the major risk for the foreseeable future remains economic weakness, not inflation. Their next meeting is scheduled March 19.

Following is the text of FOMC statement:

(begin text)

Federal Reserve Release
January 30, 2002

The Federal Open Market Committee decided today to keep its target for the federal funds rate unchanged at 1-3/4 percent.

Signs that weakness in demand is abating and economic activity is beginning to firm have become more prevalent. With the forces restraining the economy starting to diminish, and with the long-term prospects for productivity growth remaining favorable and monetary policy accommodative, the outlook for economic recovery has become more promising.

The degree of any strength in business capital and household spending, however, is still uncertain. Hence, the Committee continues to believe 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 weighted mainly toward conditions that may generate economic weakness in the foreseeable future.

(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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