Wall St. cheers as Fed leaves rates alone
Stocks jump as the central bank signals its key rate will remain at 5.25% at least until fall. Boeing powers a Dow rally. Google, Starbucks report after the bell.

Latest Market Update
January 31, 2007 — 14:30 ET
[BRIEFING.COM] The indices are holding relatively steady near their best levels of the day as investors continue to rally around encouraging news out of the Fed. The actual text of the statement reads: “Recent indicators have suggested somewhat… More

MoreThe Federal Reserve made it abundantly clear today it plans to leave interest rates alone for some time to come.

Wall Street was delighted at the decision, and the stock market was rallying strongly.

As President Bush touted the economy in New York today and strolled the floor of the New York Stock Exchange, the central bank’s Federal Open Market Committee left its federal funds rate at 5.25%, where it has been since June. The Fed’s rate-setting body said — as it has for months — that keeping inflation at bay must be its overriding concern.

But, significantly, the Fed indicated is somewhat less worried about inflation that it has been.

The economy is giving signals of “somewhat firmer” growth, the Fed statement said, and “some tentative signs of stabilization have appeared in the housing market.”

But what cheered Wall Street most was this: “Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time.”

The federal funds rate is the rate banks charge each other for overnight loans. It affects credit card rates, commercial business loan rates and auto loan rates. The Fed also left its discount rate alone at 6.25%. The discount rate is what the Fed charges banks for overnight loans.

Wall Street was expecting the Fed’s decision and seemed cheered that the Fed’s inflation fears may be easing slightly.

Stocks soared higher after the announcement. At 2:40 p.m., the Dow Jones industrials were up 105 points to 12,628. A third of the gain was due to a 4.6% gain for aerospace giant Boeing (BA, news, msgs), which reported a strong fourth quarter and offered better-than-expected guidance for 2007 and 2008.

The Standard & Poor’s 500 Index was up 8.8 points at 1,438. The Nasdaq Composite Index was up nearly 12 points at 2,460.