US base rate held at zero

Marion Dakers
THE US Federal Reserve said it would hold interest rates at a record low for “an extended period” yesterday, saying it aims to aid an economic climate that has become “less supportive”.

The Federal Open Market Committee voted nine to one to keep the rates at zero to 0.25 per cent after its two-day meeting, maintaining the historic low that has stood since December 2008.

The committee said financial conditions have become “less supportive of economic growth”, in part due to sovereign debt problems in Europe.

It also noted that bank lending has continued to contract, but predicted a gradual return to credit supply with the pace of economic recovery “likely to be moderate for a time”.

The Fed reported a rise US household spending, but said it remained constrained by high unemployment, modest income growth and tight credit.

Thomas Hoenig was the only committee member who voted for a rise in the base rate.

The long-time inflation hawk said the current rate “could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability”.

US gilt yields fell slightly following the announcement.