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Fed sends clearer signal on keeping rates low

7:04 AM, Dec 13, 2012   |    comments
Federal Reserve Chairman Ben Bernanke, chief inflation-watcher for the U.S. economy.(Photo: Manuel Balce Ceneta, AP)
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WASHINGTON (AP) - The Federal Reserve has sent its clearest signal to date that it will keep interest rates super-low to support the U.S. economy even after the job market has improved significantly.

The Fed said it plans to keep its key short-term rate near zero until the unemployment rate reaches 6.5 percent or less - as long as expected inflation remains tame. Unemployment is now 7.7 percent.

That plan adds detail to what the Fed had said before: that it expects to keep the rate low until at least mid-2015. For the first time, the Fed is making clear to investors and consumers that it will link its actions to specific economic markers.

Federal Reserve Chairman Ben Bernanke said the approach is more "transparent", allowing the markets to respond quickly to changes in the Fed's outlook.

Bernanke made clear that even after unemployment falls below 6.5 percent, the Fed might decide that it needs to keep stimulating the economy. Other economic factors will also shape its policy decisions, he said.

In a statement after its final policy meeting of the year, the Fed said it will also keep spending $85 billion a month on bond purchases to drive down long-term borrowing costs and stimulate economic growth.






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