Fed says it is unlikely to raise key interest rate until late 2014, extending timeframe
The Federal Reserve said Wednesday that it is unlikely to raise interest rates before late 2014, extending a period of record-low rates by more than a year.
The Fed says it is keeping rates low to help lift a weak but modestly growing economy.
The new timeframe hints at details in the Fed’s quarterly economic forecast, which will be released later. That will show in what year policy members expect the first increase in the Fed’s benchmark interest rate. The Fed has kept its key interest rate at a record low near zero for three years.
In a statement released after its two-day meeting, the Fed said the economy is growing moderately, despite some slowing in global growth. It held off on any other new steps to boost the economy.
The statement was approved on a 9-1 vote. Jeffrey Lacker, president of the Richmond regional Fed bank, dissented, saying he objected to the new time period.
The extended timeframe is a shift from the Fed’s previous plan to keep the rate low at least until mid-2013. The change is intended to reassure consumers and investors that they will be able to borrow cheaply well into the future. And some economists said it could lead to further Fed action to try to invigorate the economy.
The forecast on interest rates will be released along with the Fed’s updated projections for economic growth, unemployment and inflation. Fed Chairman Ben Bernanke will discuss the forecasts and Fed policy at a news conference later Wednesday.
Beyond the adjusted outlook for interest rates, the January statement tracked closely to the Fed’s previous comments about economic conditions.
The central bank used the same language in describing Europe’s debt problems and the impact on the world economy.