The U.S. central bank says it will keep its benchmark interest rate near zero at least until late 2014, a new move to try to spark the sluggish growth of the world's largest economy.
The Federal Reserve had previously said it would keep its key lending rate low through mid-2013. But on Wednesday, officials lengthened the low-interest period, saying they expect that economic growth over the next several three-month segments will be modest, and that the nation's 8.5 percent unemployment rate “will decline only gradually.”
The U.S. economy has slowly regained strength in the prolonged aftermath of the country's recession from 2007 to 2009, America's worst in seven decades. But even with some recent favorable economic trends, Federal Reserve Chairman Ben Bernanke said officials are not “ready to declare we've entered a new, stronger phase.”
Some private economic analysts have predicted that the country's economy could advance by as much as 3 percent in 2012. But Bernanke said central bank officials are projecting growth of 2.2 to 2.7 percent this year, down from their November projection of 2.5 to 2.9 percent. The central bank chief said officials think the national economy will gradually advance to a range of between 3.3 and 4 percent in 2014.
He described the U.S. jobless rate as “elevated,” but said it could fall further to 8.2 percent this year, and to a range of 6.7 to 7.6 percent by late 2014. Bernanke said central bank officials have set a 2 percent inflation target rate for the U.S. and that it could fall in the 1.4-to-1.8-percent range this year.
U.S. economic officials have regularly voiced their disappointment that their efforts to spur the American economy have not boosted it as fast as they would like. Bernanke said the Federal Reserve would not hesitate to take further action if the country continues to “have this unsatisfactory situation.”
Even with its vast economy, the U.S. could be sharply affected by the governmental debt crisis in Europe, one of its largest trading partners, and the slowing world economy. The International Monetary Fund this week slashed its 2012 projection for the growth of the global economy from 4 to 3.3 percent.
U.S. employers added 200,000 new jobs in December, and consumer spending has picked up somewhat. But about 13 million workers remain unemployed, with millions more working part-time or at jobs they consider beneath their skills.
The state of the nation's economy, including the unemployment rate and the creation of more jobs, has become the key issue in this year's presidential election campaign as U.S. President Barack Obama seeks a second four-year term. The two leading Republican presidential contenders — one-time venture capitalist Mitt Romney and former House of Representatives Speaker Newt Gingrich — have both regularly criticized Mr. Obama's oversight of the national economy. They are vying to become the Republican nominee to oppose the Democratic president in November's national election.
The central bank's key interest rate is the one that banks use to lend each other money overnight when they need more funds. The Federal Reserve has set the target for the rate at zero to a quarter of a percentage point since December 2008, during the worst of the U.S. economic downturn. The rate does not control consumer and business lending rates in the country, but helps influence what banks charge their customers.
The central bank said the country's economic conditions “are likely to warrant” the continuation of the low benchmark rate for the extended period.
