Remember the LORD for it is he who gives you the ability to produce wealth and so confirms his covenant... Deut. 8:18

Wednesday, November 4, 2009

Fed sees rates near zero for "extended period"

WASHINGTON: The U.S. Federal Reserve on Wednesday, Nov 4 expressed growing confidence that an economic recovery was building, even though it stuck to its commitment to keep borrowing costs near zero for "an extended period", according to Reuters,

As expected, the central bank closed out a two-day meeting with a decision to keep benchmark overnight interest rates in a range of zero to 0.25 percent. The vote was unanimous.

In a statement announcing the decision, the Fed said the U.S. economy had "continued to pick up" since its last meeting in September, but it expressed concern that the economy's recovery was likely to be muted.

"Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit," it said. While still emphasizing risks, the Fed was a bit more upbeat than it was in September, when it had simply said spending was "stabilizing.

The Fed was more explicit than it had been about why it expects to be able to keep overnight rates "exceptionally low" for a long time, citing "low rates of resource utilization, subdued inflation trends, and stable inflation expectations."The central bank, wary of undercutting the fragile recovery by withdrawing its monetary support too soon, has also been on guard for any indication that its emergency lending efforts could fuel an unwelcome bout of inflation down the road.

But top Fed officials, including Chairman Ben Bernanke, have said the U.S. recession, the most painful since the 1930s, has left a legacy of high unemployment and idle factories that should keep price pressures in check.
The government on Friday is expected to report that the drop in employment is abating, the jobless rate is forecast to rise to a fresh 26-year high of 9.9 percent.The world's largest economy grew at a faster-than-expected 3.5 percent annual rate in the third quarter, which effectively signaled the end of the downturn. - Reuters

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