Janet Yellen's US Federal Reserve says to keep rates low even after economy regains health

Mar 20 2014, 12:17 IST
Comments 0
Janet Yellen answers a question at a news conference following the March 2014 Federal Open Market Committee meeting, while at the Board of Governors of the Federal Reserve System in Washington. Reuters Janet Yellen answers a question at a news conference following the March 2014 Federal Open Market Committee meeting, while at the Board of Governors of the Federal Reserve System in Washington. Reuters
SummaryThe US Federal Reserve said it could keep interest rates unusually low.

The US Federal Reserve on Wednesday said it could keep interest rates unusually low even after the US job market returns to full strength and inflation rises to the central bank's target.

In announcing its view on future rates after a two-day policy meeting, it also dropped a set of guideposts it was using to help the public anticipate when it would finally start bumping overnight borrowing costs up from zero.

It said, however, that dropping a promise to hold rates steady "well past the time" the US unemployment rate falls below 6.5 percent did not indicate any change in its policy intentions. Rather than relying on unemployment and inflation thresholds to guide expectations, it said would lean on a wide range of economic indicators in making its decision.

But what stood out in the central bank's statement was its embrace of easy money policies even after the Fed achieves its goals of full employment and 2 percent inflation.

Also read: The Indian Express Most Powerful Indians list

"Economic conditions may, for some time, warrant keeping the target federal funds rate below levels the committee views as normal in the longer run," the Fed's policy panel said after its first meeting chaired by Janet Yellen.

Yellen, who took the helm of the central bank on Feb. 1, is set to hold a news conference at 2:30 p.m. (1830 GMT).

U.S. stock prices fell after the statement was released, while yields on U.S. government debt rose.

The central bank also proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.

Minneapolis Fed President Narayana Kocherlakota dissented, saying that dropping the threshold could hurt the credibility of the Fed's commitment to return inflation to 2 percent.

MEASURE WIND DOWN

The decision to continue to scale back its stimulus keeps the Fed on track for the measured wind down laid out by Yellen's predecessor, Ben Bernanke. The Fed repeated that it plans to continue trimming the asset purchases in "measured steps" as long as labor conditions continue to improve and inflation shows signs of rising back toward the Fed's 2-percent goal.

The Fed's assessment of the U.S. economy chalked up recent weakness to adverse weather.

The Fed had said since December 2012 that it would not consider raising short-term rates until the jobless rate dropped to at least 6.5 percent, as long as inflation

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...