Fed To Keep Rates 'Exceptionally Low' For Minimum Of Two Years

Admitting that the growth of the economy has been "considerably slower" than expected, the Federal Reserve announced it will keep the federal funds rate "exceptionally low" until the middle of 2013 at a minimum, according to a release.

From AP:

WASHINGTON — The Federal Reserve says it will likely keep interest rates at record lows for the next two years after acknowledging that the economy is weaker than it had thought with increasing risks.

The Fed announced that it expects to keep its key interest rate near zero through mid-2013. It has been at that record low since December 2008. The Fed had previously only said that it would keep it low for "an extended period."

The more explicit time frame is aimed at calming nervous investors, giving them a clearer picture of how long they will be able to obtain ultra-cheap credit.

From the Federal Reserve's release, emphasis is that of The Huffington Post:

Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity. Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable.

...

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. 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. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

This is a developing story.

Comments

[javiervegac]

10:36 PM on 08/18/2011

The Fed met to seek out and take a decision to boost the U.S. economy. Finally, the Fed decided to keep interest rates near zero, to encourage lending, spending and investment to create jobs, but these rates could generate higher inflation.

Check this link with an Economic Analysis:
http://blogjaviervega.blogspot.com/2011/08/what-happens-at-meetings-of-fed.html

We will be vigilant for signs of the government to boost U.S. economy and see if once and for all economists and politicians implement strong measures to face slowdown in U.S.

[eareks]

07:26 PM on 08/17/2011

He is a criminal legally speaking....killing USD to the point of shred value and kissing Chinese butts doesn't looks good. Time to change religion or politicians before mass destruction.

[teltech543]

09:49 PM on 08/12/2011

Of course the FED is going to keep rates low for the next couple years. That is because they already know that it is going to take that long for this depression to turn around. Are they really fooling us? Or themselves?

[CAELadyJane50]

01:52 AM on 08/11/2011

With 14 million American people unemployed, now is not a good time to raise interest rates because it would hurt those baby boomers who have their 401K in the stock market. The stock market just had a crash, raising interest rates right now would only cause further downward spiral.

[shadow013]

09:44 PM on 08/10/2011

You just gotta see the video clips of Bernanke telling CNBC in 2005 "no housing bubble" with the price of gold $642 oz. popping up beside him. Gold hit what today? Telling CNBC 2007 no froth in markets, no problems. Bernanke, the great predictor.

http://dailybail.com/home/a-movement-by-the-people-to-prevent-the-reappointment-of-the.html?source=patrick.net

[muck-raker]

03:37 AM on 08/11/2011

shadow...thank you FF could you please post more often?

[Carl Caroli]

04:48 PM on 08/10/2011

Bernanke is one big waste of tax payer money as far as I'm concerned. Geithner too.

[BigDaddyWow]

10:03 AM on 08/10/2011

Duuuhhh... I like money.

[stevehamlin]

09:32 AM on 08/10/2011

People:
Here's what I don't get . . .

You are all so astute as to perceive the upcoming potential for inflation.

Other than some idealistic puritanical idea of "what should be", why not just arrange your portfolio so that you can benefit and profit?
When I was a kid, doughnuts (one of the first things I can remember buying) were seven cents. Now they run about 50 cents. And, really, so what? If I've hedged myself against inflation, I just pass along the price increase or I just see my dividends or equity go up commensurate with that inflation.

I don't see the need for the NBA's new-fangled 3-point rule either. But as long as all the teams are playing with that rule, it's still just basketball.

[greyhound2]

08:22 AM on 08/10/2011

What's unfair is the big banks get free money from the Fed and then charge you userous rates.

[shadow013]

09:47 PM on 08/10/2011

And remember one big bank, think it's JP Morgan, makes more money as the number of food stamp users rises. They issue and get paid for use of food stamp cards. They win on three ends.

[merrymay]

06:48 PM on 08/11/2011

AND don't leave out...(drum roll, da-daaaaa) giant agribusiness, Coca Cola, Pepsico, and other business beneficiaries of foodstamps.
Of course, that ensures a long run and full house for foodstamps, in case anybody's worried.

[muck-raker]

08:03 AM on 08/10/2011

excerpt The Forgotten Depression: excellent read:According to Woods, it wasn’t the free market in the 1920s that caused the depression as claimed by Keynesian economists; it was government interference distorting the free market – just as it is today. Woods explains; “Artificial credit expansion…at the hands of a government-established central bank [is] the non-market culprit…. When the central bank expands the money supply — for instance, when it buys government securities — it creates the money to do so out of thin air.”

Free market economist Murray Rothbard, in his America’s Great Depression, provides compelling evidence the stock market crash of 1929 was the inevitable outcome of the easy credit policies by U.S. Federal Reserve (Fed) during the latter 1920s that fueled over-speculation.[2] It is also exactly what the Fed did from October of 2008 to June of 2011 with nearly two trillion dollars of Quantitative Easing 1 & 2 (QE1 and QE2
much more: http://www.newswithviews.com/Coffman/mike128.htm

[stevehamlin]

09:12 AM on 08/10/2011

Many entities -- the majority of them in the private sector -- have the desire and the ability to expand credit.

Placing all blame at the feet of the Fed doesn't begin to explore the totality of the issue.

[shadow013]

09:52 PM on 08/10/2011

A free market would have imposed "market discipline" and let the over-leveraged, toxic mortgage issuers and insurers crash. We don't have free market capitalism or regulated capitalism, either one, but instead the worst combination of their shortcomings.

[muck-raker]

07:46 AM on 08/10/2011

GCarliln.................................Circling the Drain..................................

http://www.youtube.com/watch?v=7KPEJNGAlqw&NR=1&feature=fvwpÊ

[muck-raker]

07:38 AM on 08/10/2011

The Day The Middle Class Died 30 Years Ago Today
A letter from Michael Moore
8-9-11

Friends,

From time to time, someone under 30 will ask me, "When did this all begin, America's downward slide?" They say they've heard of a time when working people could raise a family and send the kids to college on just one parent's income (and that college in states like California and New York was almost free). That anyone who wanted a decent paying job could get one. That people only worked five days a week, eight hours a day, got the whole weekend off and had a paid vacation every summer. That many jobs were union jobs, from baggers at the grocery store to the guy painting your house, and this meant that no matter how "lowly" your job was you had guarantees of a pension, occasional raises, health insurance and someone to stick up for you if you were unfairly treated.

Young people have heard of this mythical time -- but it was no myth, it was real. And when they ask, "When did this all end?", I say, "It ended on this day: August 5th, 1981."

Beginning on this date, 30 years ago, Big Business and the Right Wing decided to "go for it" -- to see if they could actually destroy the middle class so that they could become richer themselves.

And they've succeeded.
much more
http://www.rense.com/general94/daythemiddle.htm

[straightuptalker]

05:51 AM on 08/10/2011

"The more explicit time frame is aimed at calming nervous investors, giving them a clearer picture of how long they will be able to obtain ultra-cheap credit".

OK...,admittedly, I'm not financially savvy, but it seems the objective here is obviously aimed as an aid to nvestors in the stock market, and directed against those of us that chose to keep our money in the local bank where we could at least gain a decent level of interest return, which has declined drastically over the last two years. Now, we'll get "zero" interest for the next two years as punishment for being responsible enough to put our earnings away for a rainy day. After rolling over my 401k and selling my oil stocks to prevent further losses at the whim of Wall Street, I'm still getting hammered.

[dadw5boys]

04:28 AM on 08/10/2011

Just think how hard it would have been to sell Sub Prime Loans if the Interest Rate was at 9 % .
There would be no housing crash or any false economy overbuilding the housing in the USA by 3 million homes .
War would have been to expensive to stay long. Fewer of Our Soldiers would have died.

[sf omega man]

01:59 AM on 08/10/2011

"exceptionally low" my foot. With inflation running far above their rates, savers and holders of cash are guaranteed to lose money en masse.

This Fed scheme permits financier speculators to continue the carry-trade game anew, and with such a generous time frame put down in stone by Uncle Ben himself they can now construct any number of devious trading schemes to take advantage of this very long window.

Thanks for popping our C, Ben. Appreciate it. really.