Fed says rates could stay low
THE Federal Reserve could keep interest rates ultra-low for even longer than investors expect if the economic outlook worsens or inflation drops, minutes from the central bank’s last meeting suggested.
The minutes of the Fed’s March gathering showed lingering concern about the economy’s prospects, with policymakers indicating they were in no hurry to raise interest rates.
“The duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further,” the minutes said.
In response to the worst financial crisis in generations, the Fed has cut short term interest rates to near zero and undertaken a host of emergency measures aimed at reviving credit markets in the past three years.
Fed officials expressed concern about renewed weakness in housing markets and persistently high unemployment, saying the threat of a vicious cycle had not fully receded.
“Participants agreed that household spending going forward was likely to remain constrained by weak labour market conditions, lower housing wealth, tight credit, and modest income growth,” the minutes said.