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. Last Updated: 07/27/2016

Fed Leaves Interest Rate Untouched

NEW YORK -- The Federal Reserve on Tuesday added reserves to the banking system, giving at least a temporary reprieve from a much-expected credit tightening but leaving unresolved the future direction of U.S. interest rates.


Federal Reserve spokesman Joe Coyne said midday that the Federal Open Market Committee, the Fed's policy arm, may begin considering monetary policy in the next few hours and had not yet discussed the direction it wants to set for interest rates over the next eight-week period.


Financial markets around the world have been unsettled by heated anticipation that the U.S. central bank might raise interest rates.


But the spokesman said the Fed's policy-setting committee was still reviewing current economic conditions, a precursor to any rate move.


"They have not yet made a decision on monetary policy. They have not yet reached that point in the discussion. They are still on the economic go-around," Coyne said.


"Probably when they have finished the economic go-around they will take a short break" and then come back and discuss what level of interest rates are appropriate, he said.


The Fed is unlikely to make any announcement of its decision, monetary sources said, even though it parted with tradition last month by publicly announcing a credit tightening.


Bankers Trust economist Joshua Feinman added that the Fed could reveal a tightening move as early as Wednesday.


But by injecting reserves into the banking system Tuesday, the central bank showed that its present 3.25 percent short-term lending rate would stand.


"It means they haven't tightened policy yet," said Martin Mauro, a fixed income strategist and Fed watcher at Merrill Lynch. "They still might do it, but right now the target is 3.25 percent."