Conditions

Fed to Keep Interest 'Exceptionally Low'

The Federal Reserve expressed cautious optimism on Wednesday when, in a unanimously voted decision, it announced a plans to keep interest rates significantly low for an “extended period” of time—most likely until August 2010, but only if inflation remains consistently stable and unemployment doesn’t go down. The Federal Open Market Committee said that while businesses are still pulling back on investment and employment, it’s not occurring as dramatically as it has in the past, and consumer spending is rising. For the Fed’s plan to work, spending needs to keep growing, which means unexpected drops in employment—and thus household incomes and spending power—could knock the economy off course. The statement the Fed released today also noted that the central bank will buy $1.25 trillion of agency mortgage-backed securities and “approximately $175 billion of agency debt” during the first quarter of 2010.