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U.S. Fed to keep low interest rates at least through late 2014

(Xinhua)

14:38, January 26, 2012

WASHINGTON, Jan. 25 (Xinhua) -- The U.S. Federal Reserve said on Wednesday that it will keep the exceptionally low levels for the key interest rate at least through late 2014, with the aim of boosting economic recovery.

The U.S. economy has been "expanding moderately," the Federal Open Market Committee (FOMC) said in a statement released after a two-day meeting, noting that the unemployment rate remains high, growth in business fixed investment has slowed, and the housing market remains depressed.

The Fed's policy board expects to maintain a "highly accommodative stance" for monetary policy to support a stronger economic recovery. It notices that inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

The Fed "currently anticipates that economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014," said the FOMC statement.

The latest announcement extended the time frame for the ultra- low key interest rate by about 18 months. The Fed said last summer that the rate would not be raised from its current range of 0-0.25 percent before mid-2013. It slashed the overnight federal funds rate to near zero in late 2008 to stimulate economic growth as the financial crisis intensified.

The U.S. central bank also decided to continue its program to extend the average maturity of its holdings of securities as announced in September.

The U.S. economy has shown signs of improvement recently, especially in the labor market where the unemployment rate dropped to 8.5 percent last month. Homebuilders confidence also rose, according to data released last week.

The Fed stressed the "significant downside risks," and cautioned that economic growth over coming quarters would be " modest" and the unemployment rate would decline only gradually toward the desired levels.

In its latest quarterly economic forecast released after the statement, the Fed predicted the U.S. economy would expand by 2.2 percent to 2.7 percent in 2012, down from its November estimate of 2.5 to 2.9 percent.

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