Federal Reserve officials said their benchmark interest rate will stay low until at least late 2014 and anticipate that unemployment will remain high and inflation “subdued.”
“The Committee expects to maintain a highly accommodative stance for monetary policy,” the Federal Open Market Committee said in a statement released in Washington today. “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.”
The Fed extended its previous pledge to keep rates low at least until the middle of 2013 as inflation remains tame and more than two years of economic growth have failed to push unemployment below 8.5 percent. Some Fed officials have said further easing might be needed to put more Americans back to work and revive the housing market.
Stocks erased losses and Treasuries extended gains after the statement.
U.S. central bankers at 2 p.m. today will unveil their latest predictions for economic growth, inflation and unemployment for the next three years. They will also for the first time make public their forecasts for the benchmark lending rate. Chairman Ben S. Bernanke will follow that release with a press conference at 2:15 p.m. in Washington.
The Fed said it would continue to extend the average maturity of its $2.6 trillion securities portfolio, a move dubbed “Operation Twist.” The Fed also maintained its policy of reinvesting maturing housing debt into agency mortgage-backed securities.
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That means savings rates will stay low for consumers, so banks can maximize their profits by borrowing money at a low rate (from consumers or the government), and then charging high rates to consumers when the banks loan money.
Could deal for banks.
Perhaps they should rename the agency: The Federal Gemach for Banks