Fed: Interest Rates To Stay Low Into 2013

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Tuesday, the Federal Reserve released a policy statement indicating it will keep interest rates low for two more years, in an effort to help calm the volatile markets.

International markets were anxiously waiting to see what answers Chairman Ben Bernanke and the United States Federal Reserve’s Federal Open Market Committee would offer after their policy meeting Tuesday. Some people had speculated the meeting could result in another round of quantitative easing, but that turned out not to be the case. Instead, the Fed has decided to keep interest rates low for two more years.

“To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent,” read a press release from the Fed. “The Committee 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 mid-2013.”

“Fed policymakers used significantly more downbeat language to describe current economic conditions,” an article for NPR noted. “They also said that temporary factors, such as high energy prices and the Japan crisis, only accounted for ‘some of the recent weakness’ in economic activity.”

The article also reported that Wall Street did not seem to respond favorably to the announcement: “Stocks initially fell after the statement was released, possibly reflecting disappointment that the Fed did not announce another round of bond buying.”

The Fed press release did draw attention to several positive current economic trends, though, noting that “business investment in equipment and software continues to expand,” and over the long term, inflation expectations are stable.

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