Fed vows to keep record low rates for recovery
By Jeannine Aversa |
January 29, 2010, Friday
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Print Edition
Print Edition
THE US Federal Reserve pledged on Wednesday to hold rates at record lows to nurture the economic recovery and lower unemployment. But its decision drew a dissent from one member, signaling the Fed's challenge in deciding when to pull back stimulus money it pumped into the economy.
The Fed's statement sketched a mixed picture of the economy. Pointing to weakness, it noted that bank lending is contracting. And it dropped a reference in its previous statement to an improving housing market.
But on the positive side, the Fed said business spending on equipment and software seems to be rising. And it said economic activity "continues to strengthen."
The Fed said it still expects to end a US$1.25 trillion program aimed at driving down mortgage rates as scheduled on March 31. Yet it reiterated that it remains open to changing that timetable if necessary.
Reports on home sales this week pointed to a still-fragile housing market.
The Fed member who opposed the decision to retain a pledge to keep rates at record lows for an "extended period" was Thomas Hoenig, president of the Federal Reserve Bank of Kansas City. Hoenig said the economy has improved sufficiently to drop the pledge, which has been in place for nearly a year.
With the economy on the mend, the Fed this year can focus on how and when to pull back the stimulus money pumped into the economy to fight the financial crisis.
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