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US Fed keeps interest rate at record low

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by Kay Mitchell

The Federal Reserve yesterday opted to keep interest rates at the record low of between 0% and 0.25% and hinted that they will stay this way for the medium-term.

US interest rates have now been at this rate since December 2008 in an effort to stimulate economic growth.

The US central bank also lowered its growth forecast for the world’s largest economy in the face of higher energy prices.

It is now forecasting the economy will grow between 2.7% and 2.9% in 2001, revised from the 3.1% to 3.3% it predicted in April.

The US economy grew 1.8% on an annual basis in the first quarter of 2011 and the weakness has led many analysts to believe the Fed would take action to boost the recovery, via its quantitative easing scheme.

However, this is unlikely in the short-term.

The Fed also warned that unemployment would remain high at a rate of 8.6% to 8.9% at the end of 2011 – revised upwards from its April forecast of a range of between 8.4% to 8.7%.

Unemployment currently stands at a rate of 9.1%.

Meanwhile, its inflation forecast remained relatively unchanged at between 2.3% and 2.5% for 2011.

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News posted: June 23, 2011

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