Fed leaves US interest rates unchanged

[Say_What]

<clips>

The Federal Reserve's Open Market Committee, the Federal Reserve's rate setting arm, on Tuesday left interest rates unchanged but signalled rising confidence in the US economy.
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The Fed's monetary-policy committee voted unanimously to hold the key federal funds rate at a 45-year low of 1 per cent, where it has been since June.

Financial markets had not expected any change to rates and were focused instead on the wording of the Fed policy statement for any clues about the timing of the next move in monetary policy.

They were watching to see if the central bank abandoned its commitment to keeping interest rates low for a "considerable period," a position first staked out at the August FOMC report.

<http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1069493847166&p=1012571727162>

[Emboldened Chimp]

1. And down goes the market...

DOW -20.37
NASDAQ -28.87
S&P -6.76

[caledesi]

2. Could someone explain exactly what this means in very plain

words, bec I have a learning disability when it comes to stocks, interest rates etc.

[Yavin4]

3. The Fed's Interest Rate Policy Sets The Interest Rates For

all debts. If the Fed raises interest rates, then the rates that businesses and consumers pay on their debts also rises which in turn means that businesses and consumers will have less money to spend, thereby slowing down the economy.

In the last two years, Greenspan's Fed has kept the target for short-term interest rates to their lowest levels in 40 years. This has meant that debt has been incredibly cheap. The prime lending rate, the rate at which banks lend money to their best customers, is only 4%. Since consumption accounts for 70% of all economic growth, the Fed's cheap money policy has lead to a growing economy, even though we've lost over 3 million jobs.

Today's announcement means that the cheap debt policy will continue for about another six months or so, which lead to a quick surge in stock prices. Stock prices are based on earnings performance. Lower interest rates mean less money interest expense and greater earnings. Greater earnings mean higher stock prices.

The real danger is that this cheap debt policy will come to an end probably after the election, but this economy is not producing enough jobs for people to work off their debts, which will become more expensive in years to come.

[caledesi]

4. Thank you Y. I actually comprehended what you posted and that's good. nt