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US Central Bank Keeps Interest Rates on Hold


The Federal Reserve, the U.S. central bank, Wednesday held short-term interest rates steady for a third consecutive month. VOA's Barry Wood has more on what the interest rate decision may mean for the U.S. economy.

The decision to hold rates steady was expected. The key fed funds, the overnight interest, rate remains at 5.25 percent. Prior to June of this year and over a nearly two-year period the central bank boosted short-term rates 17 times in quarter percent increments.

The Fed had halted the steady rise in interest rates in the summer for fear skyrocketing fuel prices were significantly slowing economic activity.

Ken Volpert is a bond market strategist at the Vanguard Group in Philadelphia. He says the housing sector is feeling the pinch.

"What's keeping the Fed from having to tighten is the fact that we think housing is pretty slow," said Ken Volpert. "So if housing picks up from here we think the Fed will tighten and if housing stays where it is we think the Fed can stay on hold."

Bill Gross heads America's biggest bond trading firm Pimco in southern California. Gross predicts the next move in interest rates is down.

"You've got a Fed that has paused for three months now," said Bill Gross. "They'll probably pause for another three months. But they're subject to a slowing economy and ultimately to core inflation coming down."

The U.S. economy has been performing well over the past two years with growth averaging more than three percent. But growth is slowing at the moment and some analysts say it may drop to one percent.

Still, the stock market is signaling good times ahead as the Dow Jones Industrials have been touching record highs over the past two weeks.

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