Fed holds steady on interest rates

(September 24, 2002) The U.S. Federal Reserve today left its key interest rate unchanged but again signalled it stands ready to take action if the economy doesn’t improve. American interest rates have remained at 1.75% throughout 2002, a 40-year low.

“Aggregate demand is growing at a moderate pace,” the Fed said in a statement, adding that low interest rates combined with robust growth in productivity should be enough to foster an improving business climate.

“However, considerable uncertainty persists about the extent and timing of the expected pickup in production and employment owing in part to the emergence of heightened geopolitical risks,” the Fed added.

Analysts suggest that means the Fed will reduce rates further only if the economy takes a sharp turn for the worse. Low interest rates have helped spur strong auto and home sales, but it’s not clear if a further cut would have much effect.

The Bank of Canada also left its key lending rate unchanged at 2.75% earlier this month. But the central bank has raised rates three times this year, noting that the Canadian economy has rebounded faster than expected. The Bank of Canada’s next rate announcement is October 16.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca.

(09/24/02)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.