Fed Leaves Rates Alone, Focus Still on Inflation

Washington, DC, June 28, 2007-- The Federal Reserve kept rates at 5.25 percent and stressed that inflation is the greatest risk facing the economy.

``Readings on core inflation have improved modestly in recent months,'' the Federal Open Market Committee said today after a two-day meeting in Washington. ``However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated.''

Officials have resisted calls for rate increases and cuts in the past year, helping the economy weather a housing slump and giving inflation a chance to recede of its own accord. While price gains have slowed, policy makers still see dangers.

``The committee's predominant policy concern remains the risk that inflation will fail to moderate as expected,'' the Fed said. Turning to growth prospects, the Fed said the economy is ``likely to continue to expand at a moderate pace over coming quarters.''