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Fed funds rate remains unchanged at historically low levels

The Federal Reserve said moments ago that its main interest rate, the fed funds rate, will remain at historically low levels between zero and 0.25 percent in order to keep what it admits is a soft recovery moving along.

"While bank lending continues to contract, financial market conditions remain supportive of economic growth," the Fed's Federal Open Market Committee said in its statement, which you can read by clicking here. "Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability."

The Fed used same language as last time: Rates will remain at "exceptionally low levels for an extended period of time." This means you should not expect a hike in the rates until at least later this year, if this year at all.

There was one dissenting vote on the committee:

"Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability."

In other words, translates Miller Tabak equity strategist Peter Boockvar translates: "let's not repeat the mistake of too low for too long that helped create the credit bubble."

Inflation hawks believe that with rates this low for this long, and with all the new dollars pumped into the system over the past year, inflation is sure to raise its ugly head. But the Fed said inflation expectations remain low for the near feature, possibly because there remains so much "slack" in the system by way of high unemployment and sluggish manufacturing. When lots of folks are out of work, it's hard to raise prices on things.

"Bottom line," Boockvar concluded, "today is a non-event but expect a change in April."

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By Frank Ahrens  |  March 16, 2010; 2:26 PM ET
Categories:  Fed Reserve , The Ticker  | Tags: Federal Reserve, inflation, interest rates  
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Next: Fed leaves rate unchanged, but for how long?

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