WASHINGTON — Citing a credit crunch and soft labor market, the Federal Reserve's Open Market Committee voted 9-1 Wednesday to keep interest rates the same.
“Upside risks to inflation and inflation expectations have increased,” the Fed said in a policy statement. “In light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.”
The decision keeps the rate banks use when lending to each other, at 2%. It's the first time the committee has left rates unchanged since last summer. The panel has voted rate reductions seven consecutive times.
The sole dissenter in the vote was Dallas Federal Reserve Bank President Richard Fisher.
“Although downside risks to growth remain, they appear to have diminished somewhat,” the Fed said.
Economists for the two largest credit union trade associations said the decision was good for credit unions.
“We will still have short-term rates that are below long-term rates which is good for credit unions because the short term rates drive what they have to pay on deposits while long term rates have a bigger influence on that they earn on loans,” said CUNA Chief Economist Bill Hampel.
“The cost of funds will get lower for credit unions and this will give them a chance to catch up. They can be competitive on CD rates,” said Tun Wai, NAFCU's director of research and chief economist.
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