Fed leaves key interest rate unchanged for fourth consecutive time

Tuesday, December 12th 2006, 6:13 am

By: News On 6

WASHINGTON (AP) _ The Federal Reserve kept interest rates unchanged Tuesday for the fourth straight time as worries about inflation continued to trump concerns about the slowing economy.

At its final meeting of 2006, the central bank left its target for the federal funds rate at 5.25 percent. The funds rate, the interest that banks charge each other, has been at that level since June, when the Fed raised rates for the 17th consecutive time in a two-year effort to combat rising inflation.

The decision means that banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain unchanged at 8.25 percent.

The Fed decision was approved on a 10-1 vote with Jeffrey Lacker, president of the Fed's Richmond regional bank, dissenting for a fourth time. He favored another quarter-point rate increase to strengthen the Fed's inflation fighting efforts.

The action to leave rates unchanged had been widely expected.

Economists believe the central bank could remain on hold through the first half of 2007, watching to see if its previous rate hikes do the job of slowing economic growth enough to keep inflation under control.