Fed Holds Funds Rate @ 5.25%

The Federal Reserve's Federal Open Market Committee today reported that moderate economic growth is likely in the coming months, despite ongoing concerns about core inflation.

The Committee also announced its decision to keep the target for the federal funds rate at 5.25 percent, where is has stood since June 2006. The federal funds target rate is the interest rate charged by banks when they borrow funds "overnight" from each other. While the federal funds rate has no direct impact on other rates, such as those for mortgages, it can alter them indirectly.

In a prepared statement, the Fed acknowledged slower economic growth in recent months, including ongoing adjustments in the housing market. Should inflation fail to moderate as expected, the Committee may raise the Fed Funds rate as necessary.

**Taken from the California Association of Realtors Bulletin, dated May 9th, 2007.