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Monday 31st of May 2010
April 29, 2010    

US Fed continues with policy of low interest rates

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by Kay Murchie

The Federal Reserve has this week elected to keep US interest rates at the historically low level of between 0% and 0.25%, as widely expected.

Interest rates in the world’s largest economy have been at the low level since December 2008 and the bank has previously said that as a result of subdued inflation and high unemployment, low interest rates are required for “an extended period”.

Many analysts are not expecting a rate increase until the latter half of this year.

However, the US central bank was optimistic about growth and reported a “pick-up” in consumer spending, while improvements in the housing and jobs market had been noted.

However, caution is still being issued for the world’s largest economy after the Fed warned that low income growth and restricted credit are likely to weigh on the economy.

Tom Hoenig was the only member of the 10-strong committee to oppose the “extended period” pledge and said low rates are “no longer warranted because it could lead to a build-up of futures imbalances and increase risks to longer run macro-economic and financial stability.”

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