Blacknbengal
Well-Known Member
Federal Reserve says no rate hikes until at least late 2014
The U.S. Federal Reserve said Wednesday it will not raise interest rates until at least late 2014, even later than investors expected, in an effort to support a sluggish economic recovery.
Without making major shifts to its outlook for the economy, the central bank described the unemployment rate as still elevated and said it expects inflation to remain at levels consistent with stable prices.
“I think what they are seeing is that the rate of growth is not sufficient to bring down the unemployment rate,†said Brian Dolan, chief strategist at Forex.com.
The Fed depicted business investment as having slowed, downgrading its assessment from the December meeting.
Economic conditions "are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014," the central bank said in a statement.
Richmond Fed President Jeffrey Lacker, an inflation hawk who rotated into a voting seat this year, dissented against the decision. He prefered to omit the description of the time period for ultra-low rates.
If the Fed can convince financial markets it will be on hold longer than they had anticipated, long-term interest rates could drop as investors price in the new information.
"A significant contingent of the committee views this exercise not so much as a process improvement but more as an opportunity to ease again via the forward rate communications channel," Stephen Stanley, an economist at Pierpoint Securities, said ahead of the Fed's announcement.
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