Fed to keep interest rate at record low for 'considerable time'

[mystery-ak]

http://thehill.com/policy/finance/218050-fed-trims-stimulus-vows-continued-support

By Peter Schroeder - 09/17/14 02:14 PM EDT

The Federal Reserve on Wednesday pledged to keep interest rates near zero for a “considerable time” after its bond purchases likely end next month.

While the central bank continued to shrink its “quantitative easing” program with an eye towards eliminating it in October, officials gave no indication they were prepared to hike interest rates anytime sooner than previously expected, amid lingering concern about the economic recovery.

The Fed noted in its latest policy statement that the economy continues to grow moderately, but in a nod towards the struggles still felt by many of the unemployed and underemployed, that there is a “significant underutilization of labor resources."

The Fed has consistently trimmed the size of its monthly bond purchases since announcing plans to exit from the unprecedented stimulus. The central bank went through three rounds of “quantitative easing” after the recession, as near-zero interest rates failed to spur on the economy sufficiently.

But with the recovery seemingly taking hold, the Fed has shrank the size of its monthly purchases by $10 billion per month ever since announcing the wind-down at the end of 2013. At its current pace, the Fed would no longer buy extra bonds after its October meeting.

With that stimulus close to an end, all of the attention on Wall Street has turned towards when the Fed could hike interest rates for the first time since the financial collapse. At the close of its previous meeting, the Fed said it expected it would keep rates down for a “considerable time.”

While some Fed watchers suspected the central bank could trim that lengthy language in its latest statement, the Fed instead underlined its support for low rates by keeping the language intact in its latest statement.

Alongside that accommodative stance, the Fed also released economic projections that showed a slightly gloomier economic outlook. Fed officials expected the economy to grow slightly more slowly in the coming years than they did at their June meeting, although they also expected the unemployment rate to fall more quickly than they expected in June.

Nonetheless, the Fed also noted that it would soon be returning to more typical operations. In addition to its latest policy statement and updated economic projections from Fed officials, the central bank also released a set of principles for bringing its monetary policy back under more normal conditions.

[massadvj]

The Fed cannot really afford to raise interest rates, no matter how much the dollar might need to be strengthened in the future.  The US debt is so great that hiking interest rates would cause too much damage to the fiscal picture.  There really is no way to dig out of this hole except by continually improving economic output and productivity, and slowly inflating the currency. 

[Oceander]

The Fed cannot really afford to raise interest rates, no matter how much the dollar might need to be strengthened in the future.  The US debt is so great that hiking interest rates would cause too much damage to the fiscal picture.  There really is no way to dig out of this hole except by continually improving economic output and productivity, and slowly inflating the currency. 

Besides which, what better way to get payola into the hands of liberal scum who have large investments (e.g., Nazi Pelosi).

The democrats are going to leave the rate low until 2016, at which point they will leave it to the Republicans to clean up the mess caused by these low rates, all the while blaming the republicans for what they themselves created.

[massadvj]

Besides which, what better way to get payola into the hands of liberal scum who have large investments (e.g., Nazi Pelosi).

The democrats are going to leave the rate low until 2016, at which point they will leave it to the Republicans to clean up the mess caused by these low rates, all the while blaming the republicans for what they themselves created.

Ultimately, I think both parties are to blame here. 

[MACVSOG68]

The Fed cannot really afford to raise interest rates, no matter how much the dollar might need to be strengthened in the future.  The US debt is so great that hiking interest rates would cause too much damage to the fiscal picture.  There really is no way to dig out of this hole except by continually improving economic output and productivity, and slowly inflating the currency.

Not only that, but the Fed sees the dollar actually improving against the Euro and the GBP.  Not doing all that well against the Yuan, but as long as the dollar stays relatively strong, the Fed isn't going to make any significant changes.