US economy: Fed pledges to keep rates ‘very low’ for two years

9th August 2011

The Washington Post reports that the Federal Reserve "gave no indication that it will launch any major new programs to try to combat the weakening economy" and financial markets.

However the decision was not unanimous three members of the Fed's policy committee dissented over the decision to keep rates low, the most to do so since 1992.

Richard W. Fisher, Narayana Kocherlakota and Charles Plosser, presidents of the Federal Reserve banks in Dallas, Minneapolis and Philadelphia, respectively, all preferred not to put a specific time on the low rate plans.

 

The announcement sent the interest rate on two-year Treasury securities down from 0.26% to 0.16%.

That move reflected the expectation that the Fed's interest rate will now remain near zero for the coming two years.

The stock market was down 0.9 percent after the announcement, as measured by the Standard & Poor's 500, compared with being up 1.3 percent for the day beforehand.

The Wall Street Journal reported how Fed officials also downgraded their assessment of the U.S. economy for the third time this year, saying that economic growth so far this year has been "considerably slower than the Committee had expected."

For the latest comment on the Fed's decision read Shaun Richards' blog 

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