Federal Reserve Leaves Key Rate Unchanged At 2 Percent

Washington, DC (AHN) - The Federal Open Market Committee voted unanimously on Tuesday to leave the federal funds rate unchanged at 2 percent. The discount rate also remains unchanged, at 2.25 percent.

The FOMC policy statement touched on the recent economic climate, stating that "economic growth appears to have slowed recently, partly reflecting a softening of household spending."

Inflation risks and downside risks to economic growth were both large concerns of the Fed Committee. However, the Committee said they will act as needed in order to promote economic activity. They also expect inflation to moderate later this year and into next year.

"Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters" the Fed said in their statement.

Most economists expected the Fed to leave rates unchanged up until a few days ago. The Lehman and AIG woes quickly began changing that point of view. The markets initial reaction to the rate decision was negative with the Dow Industrials selling off 100 points. However, after investors digested the news, stocks quickly rallied and the Dow is currently trading positive.