Fed sits tight despite housing market crash

WASHINGTON, Aug 7, 2007 (AFP) – The Federal Reserve announced Tuesday it was keeping US interest rates unchanged at 5.25 percent as it acknowledged concerns about tightening credit and a persistent housing market slump. The central bank has now kept US interest rates steady for just over 13 months since June of 2006. The 10 policymakers of the Federal Open Market Committee (FOMC) voted unanimously to keep rates unchanged.

In justifying its decision, the Fed said the world’s largest economy seems likely to continue expanding at a “moderate” clip, and that its top priority remains the fight against inflationary threats.

But policymakers conceded there were dark clouds looming on the economic horizon.

“Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing,” the Fed said.

“Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy,” the central bank said.

Carl Tannenbaum, a chief economist at ABN AMRO North America, said the Fed made the right call on rates for August,