No change in key rate or in Fed's comments

WASHINGTON - The Federal Reserve left interest rates unchanged yesterday, extending a nearly yearlong period of stability that has positives for savers and borrowers.

Fed Chairman Ben S. Bernanke and his central bank colleagues kept the key federal funds rate at 5.25 percent, where it has stood since June. The decision was unanimous. This rate is the Fed's target on what commercial banks charge one another on overnight loans, and it affects interest rates on most loans to consumers and businesses.

The Fed's decision, for example, means that commercial banks' prime interest rate - for certain credit cards, home-equity lines of credit, and other loans - stays at 8.25 percent.

Borrowers had suffered through two years of rate increases from mid-2004 to mid-2006. But the current period of steadiness can help them regain their footing by paying down or consolidating debt, experts said, and predictable rates can help with investment decisions.

For savers, "although rates have stabilized, they have stabilized at attractive levels," said Greg McBride, a senior financial analyst at Bankrate.com, a Florida tracker of consumer interest rates. "They can earn in excess of 5 percent for a range of bank products, from money market accounts to five-year CDs."

On Wall Street, the Fed's action and views about the economy gave the Dow Jones industrial average a lift yesterday.

In a statement announcing its decision, the Fed used the same language as it did at its previous meeting, in March, and said any future rate change would depend on data about economic growth and inflation.

But it emphasized that its "predominant concern will remain the risk that inflation will fail to moderate."

Inflation is bad for the economy and for people's pocketbooks. Prices that rise too much can eat away at workers' paychecks, investments, and standards of living.

Assessing economic conditions, Fed policymakers noted that growth slowed earlier this year and that the economy was still feeling the impact of the housing slump.

While that was a tad more bearish than its previous assessment, Fed policymakers nonetheless continued to predict that the economy would expand at a "moderate pace."

The Fed's goal is for the economy to slow sufficiently to fend off inflation, but not so much as to slide into a recession.

The Fed's decision to leave rates alone comes as economic growth has slowed, and inflation, while showing some improvement, is too high for the Fed's tastes.

Economic growth - measured by the gross domestic product - slowed to a near crawl of 1.3 percent in the first quarter of this year, its worst performance in four years. Fallout from the housing slump was the main culprit.

Meanwhile, inflation is running above the Fed's 1 percent to 2 percent comfort zone. An inflation gauge that excludes volatile energy and food prices was up 2.1 percent in March from a year earlier.

"The Fed is really in a box right now," said Carl Tannenbaum, chief economist at LaSalle Bank Corp. "Growth in the early part of this year has been sluggish. On the other hand, prices are still under a lot of pressure. That doesn't really give the Fed room to either ease rates or tighten them."

From yesterday's Federal Open Market Committee statement on interest rates and the U.S. economy:

Economic growth slowed in the first part of this year. . . . Nevertheless, the economy seems likely to expand at a moderate pace.

Core inflation remains somewhat elevated. . . . The high level of resource utilization has the potential to sustain those pressures.

In these circumstances, the committee's predominant concern remains the risk that inflation will fail to moderate.

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