*EPF209 12/10/2002
Text: Federal Reserve Group Keeps a Key Interest Rate Steady
(Says indicators suggest economy overcoming its weakness) (350)

The policy-setting body of the Federal Reserve has voted 12-0 to leave a key interest rate unchanged giving consumers and businesses more time to take advantage of the lowest borrowing costs in 40 years.

The Federal Open Market Committee (FOMC) at its final meeting in 2002 announced it decided to hold the federal funds interest rate -- the interest rate that banks charge each other on overnight loans -- at 1.25 percent.

The FOMC said in its December 10 statement that low interest rates coupled with strong growth in productivity are providing "important ongoing support to economic activity."

At the previous meeting in November the FOMC cut the overnight rate by 0.25 percentage points.

The committee said that the limited number of economic indicators available since that meeting suggest the likelihood of "the economy working its way through its current soft spot."

Indicators released in November revealed a sharp decline in new requests for unemployment benefits, improved manufacturing activity and a rebound in consumer confidence spending and confidence. In December, however, the Labor Department reported the unemployment rate hit its highest level in eight years.

Following is the text of the FOMC 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.

The Committee continues to believe that this accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity. The limited number of incoming economic indicators since the November meeting, taken together, are not inconsistent with the economy working its way through its current soft spot.

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; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jerry L. Jordan; Donald L. Kohn, Robert D. McTeer, Jr.; Mark W. Olson; Anthony M. Santomero, and Gary H. Stern.

(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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