US Fed maintains rate at 2%; stocks climb

Federal Reserve leaves key rate unchanged at 2%

The Federal Open Market Committee of the US Federal Reserve Board, resolved to keep its target for the federal funds rate at 2 % .

As per the committee, the overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.

The committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.According to the committee although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Following the above announcement by the Federal Reserve Board, the stocks in U.S. witnessed a considerable rise , with Standard & Poor`s 500 Index recording its best gain in two weeks, adding 7.68 points, or 0.6 %, to 1,321.97, Dow Jones Industrial Average gaining 4.4 points , or less than 0.1 %, to 11,811.83, and Nasdaq Composite Index climbing 32.98, or 1.4 %, to 2,401.26.