Fed to keep rates low until unemployment rate improves

As expected, the central bank says it will continue its bond-buying program into the new year, a decision that has helped boost stock prices (Dow is up about 75 points). The Fed also says that it will keep interest rates low until the unemployment rates drops to 6.5 percent. November's rate was 7.7 percent, and economists warn that further declines will be tough because so many of those without work have been looking for a while. From the NYT:

That replaces the central bank's earlier guidance that it expected interest rates to remain near zero at least until mid-2015, further emphasizing that reducing unemployment is now the Fed's priority. As in September, the Fed's statement suggested that it is not responding to evidence of new economic problems, but instead increasing its efforts to address existing problems that have restrained a recovery for more than three years. "The committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens," the Fed's policy-making committee said in a statement issued after a two-day meeting in Washington.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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