Fed Expected to Hold Rates Steady
The Federal Reserve isn't likely to reduce U.S. interest rates in response to the financial crisis that has swept Russia and many other nations this month, a number of Fed officials said here today.</br></br>The added uncertainty about where the world economy is headed and the likelihood the crisis will be a drag on U.S. growth, however, has virtually eliminated pressure on the Fed to raise rates to keep U.S. inflation low, the officials said.</br></br>William Poole, president of the St. Louis Federal Reserve Bank, who dissented in favor of a rate increase at a Fed policymaking session in May, said he no longer is pushing for higher rates. None of the other officials, including Fed Chairman Alan Greenspan, who are here for the Kansas City Federal Reserve Bank's annual economic conference, would speak for attribution.</br></br>But several of the 14 policymakers here agreed that damage to the economies of nations such as Brazil, Mexico and Canada from sharply higher interest rates and falling stock prices means a weaker world economy and downward pressure on prices for many goods and services. Like the turmoil that began in Asian countries last year, the latest developments will be a serious drag on U.S. growth by lowering demand for U.S. exports, particularly in Latin America.</br></br>At the same time, slower growth around the world and falling prices for many products, especially basic commodities such as oil and copper, and the rising value of the dollar, will keep the cost of U.S. imports falling. That in turn will put downward pressure on inflation in this country, the Fed officials said.