Fed Holds Rates Steady But Keeps Stance Against Inflation
The Federal Reserve left its benchmark interest rate unchanged at 5.25% but left the door open for higher interest rates if inflation persists.
The decision, which was widely expected, echoed the stance the central bank took at its last meeting in October.
In their accompanying statement, policymakers said economic growth has slowed due to "a substantial cooling" in the housing sector, but that "some inflation risks remain."
In an interview on CNBC's "Street Signs," former Federal Reserve Dallas Bank President Robert McTeer called the latest comments from the central bank "slightly more dovish" than the October policy statement due to the addition of the word "substantial" to describe the housing market.
According to McTeer, the additional word doesn't necessarily signal a change in policy, but it is "a reflection of what's been happening."
"They're In Touch"
"It's good that they're showing us that they're in touch with what's happening," McTeer said. He added, he expects the Fed to continue to keep rates "on hold for a while."
Other Fed watchers also focused on the continued weakness in housing and its potential impact on consumer spending, the biggest driver of economic growth.
"A lot of what (Fed policymakers) do is going to depend on what happens with the consumer around this housing market," said Ken Volpert, a portfolio manager at the Vanguard Total Bond Market Fund, who also appeared on CNBC's "Street Signs."
Volpert expects the Fed to keep a close eye on whether the weaker housing market has an impact on consumer behavior.
Some economists have been surprised by the Fed's recent statements expressing more concern about inflation than the slowing economy. But last Friday's employment report, showing a big increase in November payrolls, reinforced the Fed's view that the economy remains fundamentally sound.
Employment Still Key
Some think employment will remain an important indicator of economic health.
"I think the key thing to watch out for is: will the weakness in housing and autos potentially spread across other sectors of the economy and affect employment because the employment picture has been really the force that keeps the economy on an even keel," said John Miller, a portfolio manager at Nuveen Investments, on CNBC's "Closing Bell."
In today's Fed vote, the sole dissenting voice was Richmond Fed President Jeffrey Lacker. He has called for a another quarter-point hike in the Fed funds rate, as he has done ever since the Fed paused its two-year campaign of interest-rate hikes this summer.
This is Lacker's last FOMC meeting due to the Fed's annual rotation system.