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Fed Likely to Leave Rates Alone for Extended Period
Not surprisingly, The Federal Reserve kept the federal funds rate at a record low of near zero, in an effort to spur economic growth. But, what most observers wanted to know is when the Fed will start sending signals that it plans to boost interest rates, and if that signal will come soon. Most of the Fed officials decided that a pledge to keep rates low for an extended period (regarded by economist as six months or more) was warranted. But, one dissenter, Thomas Hoenig,
president of the Federal Reserve Bank of Kansas City,
opposed the pledge, claiming the economy is strong enough
for the Fed to telegraph that rates will increase soon to
prevent inflation. But, he was a lone voice, as the others
believe the need to feed a recovery will remain greater than
the need to control inflation for awhile.
The Fed also said that its purchases of more than a
trillion dollars of mortgage-backed securities would be
finished by the end of March as scheduled. Some analysts
contend that once the program ends, mortgage rates could
rise and dampen the recovery in housing and the overall
economy. However, the Fed has left the door open to
extending the program if the housing recovery falters.
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Date Last Updated: 03/17/2010
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