The U.S. Federal Reserve once again left its key interest rate unchanged amid economists’ warning to keep vigil on inflation.
Fed officials in a unanimous move left their target for short-term interest rates at 5.25 percent, the highest in 61/2 years, following the conclusion of their two-day meeting. The Fed has not changed rates since June 2006 after raising them 17 times over two years.
Core inflation mounts 2 percent over the 12 months ending in April, compared with March’s 2.1 percent annual increase.
Inflation has moderated in recent months but still remains on the high side of what some Fed officials have deemed their comfort zone of 1 percent to 2 percent. The Fed’s preferred inflation measure, based on spending excluding food and energy was 2 percent in April, down from 2.4 percent in February.
Gyrating energy prices are a wild card to the inflation outlook. Economists worries that there is always a risk that higher energy prices could affect other prices, which would boost underlying inflation. Dilemma of oil prices are creating commotion in the economy as it is mounting regularly. In trading Thursday, oil prices briefly topped $70 a barrel for the first time since Sept. 1, but then settled back to $69.57 a barrel. Nationally, gasoline prices have eased in recent weeks.
Policymakers are satisfied with the “core” inflation, but stressed to keep vigil on the fluctuating energy and food prices.
However, fed still remains doubtful and it is anticipated that on the scheduled meeting in August, Fed will keep rates steady on existing mark.
