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Fed takes no action on rates


WASHINGTON -- The Federal Reserve ended a two-day strategy session on monetary policy yesterday without announcing an increase in short-term interest rates or explaining its apparent inaction.

Analysts took this to mean that the central bank, which had raised rates four times since early February, was satisfied with early signs that the economy is slowing enough to minimize the risk of resurgent inflation.

It had been widely agreed that the Fed's assessment of the domestic economy would outweigh its interest in supporting the dollar in world currency markets, even though higher rates, by making the dollar more appealing, would tend to enhance foreign investment and minimize inflation from imports.

But while yesterday's result came as no surprise, some analysts had speculated that the Fed might continue its practice since early February -- when it began its current series of rate increases -- of providing a brief rationale for its moves, or at least to make a clear declaration that it had decided to leave its stance unchanged.

Yesterday's development did not absolutely mean that the Fed had decided to keep rates where they were. Until February, the committee's moves had to be deduced from watching the financial markets -- usually the day after it met -- since the committee did not announce its immediate intentions.

The Fed did issue a statement yesterday, but the statement said only: "The meeting of the Federal Open Market Committee ended at 12:35 p.m. and there will be no further announcement."

Joseph R. Coyne, a spokesman, denied that any precedent had been set in announcing immediately the four earlier increases in the Fed funds rate. Nor would he comment on the possibility that the Fed yesterday made a "contingent" decision to take action based on some future development.

But there was disappointment at the House Banking Committee where Henry B. Gonzalez, D-Texas, who serves as chairman, has long pressed for greater and quicker disclosure of Fed actions.

Securities and currency markets responded fairly positively, though with no great enthusiasm, to the outcome of the Fed meeting.


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