US Interest Rates Frozen Through 2014

January 26, 2012  

The US Federal Reserve says it will extend its freeze on interest rates until the end of 2014 in its longest longest-running response to the ongoing global financial crisis.

Reserve officials say the US economy “moderately” expanded in recent weeks, but that unemployment remained at a high level, the housing sector remained in a deep depression, and the possibility of a new financial crisis in Europe continued to hamper the US domestic economy.

It said that 11 of the 17 members of its Federal Open Market Committee expected interest rates would remain stable until 2014.

The committee predicted growth to accelerate over the next three years, from a maximum pace of 2.7 per cent this year, to a maximum pace of 3.2 per cent next year and up to 4 per cent in 2014.

It is first such detailed predictions published by  senior officials at the fed about future policy decisions.

The new forecast is part of an effort by the Fed to exert greater influence over the expectations of investors to increase the impact of its policies.

The Fed also issued a statement elaborating on its legal mandate to maintain stable prices and to limit unemployment.

Officials said they expect unemployment to be at least 8.2 per cent this year, and no lower than 7.4 per cent next year. By the end of 2014, the Fed still expects unemployment to be at least 6.7 per cent.

Last year the United States lost its coveted AAA credit rating as the financial crisis set in. The primary reason cited was an inability by lawmakers to manage the spiraling Federal deficit.

Over the past two years President Barack Obama and his Republican rivals have fought a series of bush wars over the economy and the Federal budget in the legislature.

The issue has also been forefront as GOP contenders seek their party’s nomination to run against Obama in the 2012 presidential election.

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