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Date: 9/16/2008
Authors: Scott Lanman and Craig Torres

News Bite

Fed Keeps Rate at 2%, Rebuffing Call for Reduction

The Federal Reserve left its main interest rate at 2 percent, rebuffing calls by some investors for an immediate cut after Lehman Brothers' bankruptcy shook markets worldwide. The Fed did signal it will consider a reduction in the future by acknowledging in its statement that strains in financial markets are increasing. The central bank also said that employment is weakening and export growth is slowing, and dropped a reference to elevated inflation expectations. The decision was unanimous, the first such agreement in a year.

Chairman Ben S. Bernanke is trying to draw a line between interest rates, which will be set based on its assessment of the broader economy, and emergency operations designed to combat financial turmoil. Less than 48 hours before today's decision, the Fed expanded its lending to securities firms in the wake of Lehman's failure, including accepting equities as collateral for the first time.

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