The FOMC Holds Target Rate at 5.25%

No surprise, the Fed left the target rate at 5.25%. The statement says:

1. Recent readings on output growth have been mixed due to adjustment in the housing sector, but as in the last statement the Committee concludes that "the economy seems likely to continue to expand at a moderate pace over coming quarters."

2. The Fed believes says recent readings on core inflation have been somewhat elevated, but they continue to expect moderation of inflation in the future. However, the statement notes the potential for high levels of resource utilization to "sustain inflation pressures."

3. The balance of risks is still tilted toward inflation. Some analysts read the statement as implying that the Fed is backing off of its inflation bias (the write-up changes from "any additional firming" to "policy adjustments," and the dropping of the word firming is seen as a signal that the Fed has a more balanced risk assessment between inflation and slowing output growth), but I still see the statement as indicating the Fed sees risk of inflation as the predominant concern (see the WSJ and Bloomberg). [Update: William Polley comments on whether the bias has changed. Kash Mansori also weighs in. Bloomberg's John Berry also discusses this. All agree that while the Fed has given itself a bit of wiggle room with the change in wording, inflation is still the main concern.]

4. There was no dissent.

Here are the differences between the last statement and this one:

March 21, 2007 Statement	January 31, 2007 Statement
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.	The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.	Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market. Overall, the economy seems likely to expand at a moderate pace over coming quarters.
Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.	Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time. However, the high level of resource utilization has the potential to sustain inflation pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.	The Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.	Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.