US Fed to hold record-low interest rate through 2014 at least

25 January 2012 19:25  [Source: ICIS news]

WASHINGTON (ICIS)--The US Federal Reserve Board said on Wednesday that it will keep its record-low interest rates at 0-0.25% through 2014 at least, saying that the long-term commitment to low rates was needed because US economic prospects are only modest.

The Fed – the US central bank – had earlier promised to keep its key federal funds interest rate at or just above 0% through mid-2013.

But Wednesday’s new rate decision extends the record-low rate for at least 18 months beyond the middle of next year.

The 0%-0.25% federal funds rate was first set in December 2008 and has been in force for three years.

In announcing the long-term low rates forecast, the Fed’s rate-setting federal open markets committee (FOMC) noted that the US economy has been expanding only moderately and that unemployment remains high, business investment has slowed and the housing sector is still depressed.

“The committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually,” the Fed statement said, adding that there appears to be little risk of inflation.

In addition to expecting only gradual progress in lowering the US unemployment rate, the Fed again warned that the ongoing European debt crisis continues to pose a threat to the slow US recovery.

“Strains in global financial markets continue to pose significant downside risks to the economic outlook,” the statement said.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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