Online Listings

Federal Reserve to Maintain Interest Rates Near Zero

By | 01.26.12

Federal Reserve to Maintain Interest Rates Near Zero

On Wednesday, the Federal Reserve announced that it would maintain short-term interest rates near zero for the next 18 months in an effort to spur economic growth. This move comes after a two-day policy committee meeting and the subsequent publication of the committee’s plans and predictions. The Fed admitted that the economy has expanded moderately recently, but cautions that jobs remain scarce, the housing sector is still depressed and Europe’s economic woes could undermine domestic recovery efforts.

The Fed anticipates that high unemployment and sluggish retail sales will still be in evidence by late 2014. Its economic growth forecast spells an incomplete recovery with up to a 2.7 percent increase for 2012, a 3.2 percent increase in 2013 and a 4 percent increase in 2014. (Based on information released by 11 of the committee members, near zero interest rates are not expected to continue beyond late 2014.) The Fed has also projected that unemployment will drop no lower than 8.2 percent this year, 7.4 percent by the end of next year and 6.7 percent by the close of 2014.

After the announcement, Federal Reserve chairman, Ben S. Bernanke restated the Fed’s intention to provide more transparency in its long-term goals, saying: “It’s important for us to say what we think and it’s important for us to provide the right amount of stimulus to help the economy recover from its currently underutilized condition.”

Dr. Ian C. Shepherdson, United States economist for High Frequency Economics, offers a cautionary note about broadly interpreting the most recent actions of the Fed in light of Bernanke’s short term status. (Bernanke’s term will end at the beginning of 2014.) Quoted in The New York Times (January 25, 2012), he said: “I wouldn’t feel bound by anything the previous chairman had done. And three years is a very, very long time.”

After the announcement yesterday, the Dow reversed a downward morning trend to finish up 81.21 points at 12,756.96.

References:

Appelbaum, Binyamin. “Fed Signals That a Full Recovery Is Years Away.” The New York Times. 1/25/12. (1/25/12). http://www.nytimes.com/2012/01/26/business/economy/fed-to-maintain-rates-near-zero-through-late-2014.html?pagewanted=1&_r=1&emc=na

Goldfarb, Zachary A. ” Fed: Rates likely to remain near zero through 2014; inflation target set at 2%” Washington Post with Bloomberg. 1/25/12. (1/26/12). http://www.washingtonpost.com/business/economy/fed-rates-likely-to-remain-near-zero-through-2014/2012/01/25/gIQAvcujQQ_story.html

High Frequency Economics. “Ian Shepherdson Chief U.S. Economist – Bio.” (1/25/12). http://www.hifreqecon.com/Ian-Shepherdson.html

Washington Post with Bloomberg. “Federal Reserve Economic Estimates.” 1/25/12. (1/25/12.) http://www.washingtonpost.com/business/economy/federal-reserve-economic-estimates/2012/01/25/gIQA9ucZRQ_graphic.html

(Visited 36 times, 1 visits today)
Comments

Like what you see?
Get more free content.

Next Up In Online Listings

After COVID, an Up-to-Date Google My Business Listing is Crucial

COVID-19

After COVID, an Up-to-Date Google My Business Listing is Crucial

We know that when COVID-19 struck, many hard-working people were met with days of struggle, including small business owners....

Read More

Thryv’s New Business Scan Scores Your Customers’ Online Experience

Back Office

Thryv’s New Business Scan Scores Your Customers’ Online Experience

What do customers and prospects think about their online experience with your business? We’ve developed a free do-it-yourself business...

Read More

Are You Turning Off Your Customers? Here Are 6 Ways to Win Them Back

Business Websites

Are You Turning Off Your Customers? Here Are 6 Ways to Win Them Back

We live in a consumer-driven marketplace and, as we know, that means evolving expectations. After 20 years in the...

Read More