Fed Leaves Interest Rates Alone

The Federal Reserve yesterday left the key federal funds rate at 5.25 percent — unchanged since last June.

But in a discussion of future changes, the Fed took a more neutral stance than in previous statements, saying "future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth.” Observers view this as opening the door to cutting interest rates in the coming months if economic growth decelerates further.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, says it is normal for inflation to ease when an economic expansion is decelerating — and for the Fed to show "equivocation." When the Fed's expectation of "moderate" growth fails to materialize, he says, "expect rapid easing" with the first cut by August