Fed Checks

WASHINGTON, D.C.: Surprising top Wall Street analysts who were braced for a short-term interest rate increase, the Federal Reserve Tuesday opted to leave the rates unchanged. Stocks rose sharply after the news, ending a rollercoaster day that had sent priWASHINGTON, D.C.: Surprising top Wall Street analysts who were braced for a short-term interest rate increase, the Federal Reserve Tuesday opted to leave the rates unchanged. Stocks rose sharply after the news, ending a rollercoaster day that had sent prices down as much as 80 points in the morning with a 74-point Dow advance to 7303. The decision will hold the rate that commercial banks charge one another for overnight loans at 5.5 percent. A rate hike would have meant higher borrowing costs for millions of credit card-wielding Americans, but would also have slowed the economy and dampened inflation. Characteristically refusing to comment on the decision, Fed chairman Alan Greenspan and his colleagues left Wall Street economists to speculate over their reasoning. Analysts had expected at least a slight increase because the economy expanded at a rapid 5.6 percent annual rate in the first quarter, the best in 10 years. But several other reports released in recent weeks indicated that inflation is under control, eliminating the need for a rate hike to maintain a steady economy. Retail sales for April marked their largest decline in 10 months, for example, while orders for durable goods fell 3 percentin March. Politics may also have played into the decision: Greenspan had said that a balanced budget amendment, on which Congress and the President recently agreed, would likely stave off the need for the Fed to meddle with the rates. The central bankers will have a chance to reconsider that strategy when they meet again on July 1.