Staying the Course

WASHINGTON, D.C.: Despite signs of new-found strength in housing and manufacturing, Federal Reserve policy-makers decided Tuesday to keep short-term interest rates steady. The central bank's decision, which had been widely expected, means borrowing costs for millions of consumers and businesses whose loans are linked to Fed rates will stay the same. The Fed has kept interest rates at the same level since last January, when it reduced the interest that banks charge each other by a quarter-point down to 5.25 percent. It was the third in a series of rate cuts aimed at spurring an economy that looked as though it could topple into a recession. The economy quickly surged in the spring and Fed watchers have been waiting for a rate increase. But the central bank instead has sat back and waited to see if the economy would slow on its own. Economists say November's 9.2 percent rise in housing starts, the best since July 1995, overstated the strength in housing because it comes on the heels of two months of decline. Nonetheless, it did send interest rates on the inflation-sensitive bond market higher. Yields on 30-year Treasury bonds rose to 6.68 percent, up from 6.62 percent Monday. Economists also played down a 0.9 percent jump in factory production reported Monday, saying more than half of that increase reflected a rebound after strikes disrupted October production.