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WASHINGTON The Federal Reserve on Wednesday left interest rates near zero and said the economy, while on more stable footing, is likely to remain weak for some time.
The Fed gave no indication that despite improving signs in the economy, it is considering imminent hikes in the key federal funds rate, the rate banks charge one another for overnight loans. Policymakers at the central bank voted 10-0 to maintain the rate between zero and 0.25 percent, where it has been since December, and reiterated that it will likely keep it there for “an extended period.”
“They're nowhere close to thinking about an exit strategy or raising rates,” said Alan Levenson, chief economist at T. Rowe Price in Baltimore.
In its one-page release, the Fed, as expected, gave a more optimistic assessment of the economy since the monetary policy committee last met in late June. The committee said this time that “economic activity is leveling out,” as opposed to its previous statement that economic contraction is slowing.
Still, the Fed noted that household spending remains constrained by job losses, lower housing wealth, tight credit and sluggish income growth.
The Fed reiterated that given the considerable unused capacity in the economy, it expects inflation “will remain subdued for some time.”
The Fed, after its two-day meeting, also extended from September to October to wind down its program to purchase $300 billion of Treasury securities.
The central bank undertook the program to reduce long-term interest rates and help prop up the economy. Some analysts and investors have raised concerns that such purchases, in which the Fed is effectively printing money, will drive up interest rates.
Kerry Hall Singe: 704-358-5085
