| |
WASHINGTON : The Federal Reserve on Tuesday maintained record low interest rates in the hope of stimulating a still fragile US economic recovery, dogged by high unemployment and tight credit.
After a one-day meeting, the Federal Open Market Committee (FOMC) voted 9-1 to keep the federal funds rate -- at which banks charge each other for loans -- at an unprecedented zero to 0.25 percent range, a statement by the central bank said.
The Fed said it expected to hold the "exceptionally low" rate "for an extended period" -- reiterating its standard guidance since it slashed rates to record lows in December 2008 in a bid to jolt the world's largest economy from its worst recession in decades.
Data gathered since January showed "economic activity has continued to strengthen and that the labor market is stabilizing," the statement said after the six-hour meeting chaired by Fed boss Ben Bernanke.
But noting that the pace of economic recovery was likely to be "moderate" for sometime, the Fed said American households remained reluctant to spend amid high unemployment, modest income growth, lower housing wealth, and tight credit.
Employers also remained reluctant to add to payrolls and bank lending continued to contract, the Fed reported.
"Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability," the statement said.
Kansas City Fed president Thomas Hoenig was, for the second meeting in a row, the sole dissenting voice to the FOMC decision.
He expressed concern that the promise of low interest rates for the long-run could present economic risks.
Hoenig believed "the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted," the Fed statement said. Such low rates could "increase risks to longer-run macroeconomic and financial stability."
Analysts had expected the meeting to be a heated affair, with Hoening, and at least two other non-voting regional central bank chiefs reportedly wanting to change the language of the Fed pledge to keep interest rates at virtually zero percent "for an extended period."
US authorities pumped hundreds of billions of dollars into the world's largest economy to jolt it from a deep recession since December 2007.
The economy started growing from the second half of last year -- at 2.2 percent in the third quarter and 5.9 percent in the final quarter of 2009.
Many believe the Fed will need to raise rates gradually to keep inflation in check.
The Fed policy makers also confirmed at the meeting Tuesday that the central bank will complete purchases of 1.25 trillion dollars of mortgage-backed securities by the end of this month.
The programme has been widely credited with pumping up the housing market, which was at the epicenter of the financial crisis triggered by a mortgage meltdown.
- AFP /ls
|
