Fed hints at low interest rates as the world faces a sluggish recovery
THE US Federal Reserve said its huge liquidity injections were not an inflationary concern yesterday and hinted interest rates would not rise quickly.
James Bullard, a senior official, said the Fed would orchestrate monetary policy by adjusting its extensive security purchases rather than raising rates. Playing down December unemployment data which showed joblessness staying steady at 10 per cent, Bullard said: “Interest rates may remain low for quite some time… Markets should be focusing on quantitative monetary policy rather than interest rate policy.”
His comments suggest the central bank, which has pumped $1tr (£620bn) into markets in an attempt to counter the savage recession, is still cautious on the outlook for America.
They came as Moody’s forecast a “sluggish” global recovery. The ratings agency said economies would return to trend growth rather than rebounding strongly in 2010 and 2011, with unemployment a persistent bane and budget deficits dragging on countries’ performance.
“The crisis will leave lasting scars, with many economies not returning to previous outputs,” Moody’s said.