Fed upbeat but rates kept low

THE FEDERAL Reserve issued a positive outlook for the US economy and employment forecasts yesterday despite keeping to its promise of holding interest rates around zero.

Benchmark borrowing costs were kept in a zero to 0.25 per cent range as the US central bank said consumer and business spending was picking up.

The Fed, which is chaired by Ben Bernanke, said that rates were likely to remain low because of low inflation and elevated unemployment.

Employers, the bank warned, were still reluctant to add new workers but reassured that the labour market in the US was beginning to show signs of improvement.

“Economic activity has continued to strengthen and ... the labour market is beginning to improve,” the Fed said in its policy statement.

Thomas Hoenig, president of the Kansas City Federal Reserve Bank, continued his stance against the Fed’s policies for a third consecutive time as he opposes the low interest rate pledges and warned that it could lead to “a build-up of future imbalances.”

The US gross domestic product rose at 5.6 per cent the annual rate in the fourth quarter and is expected to climb at a 3.4 per cent pace this quarter.