US Federal Reserve to Keep Interest rates at 0.25%
Wednesday, 10 August 2011

Noting that "economic growth so far this year has been considerably slower than the Committee had expected," the Federal Reserve Open Market Committee (FOMC) announced that it plans to hold the federal funds rate at "exceptionally low levels at least through mid-2013."

This is the first time the Fed has been explicit in providing a timeline, and it was somewhat controversial among members. Three FOMC members dissented from the decision to announce a specific date for the extended language, favoring the previous more generic language.

The Fed's economic assessment was considerably more gloomy than its previous statement. Conditions in the labor market have deteriorated, household spending has flattened, and "downside risks to the economic outlook have increased."

In addition, the statement noted that temporary factors "appear to account for only some of the recent weakness in economic activity."

The FOMC expects inflation to decelerate over the next several quarters and to "settle at levels at or below those consistent with the Committee's dual mandate."


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