Fed: Benchmark Rate Will Stay Low Until Late 2014

Federal Reserve officials said their benchmark interest rate will stay low until at least late 2014 and anticipate that unemployment will remain high and inflation “subdued.” “The Committee expects to maintain a highly accommodative stance for monetary policy,” the Federal Open Market Committee said in a statement released in Washington today. “Economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

The Fed extended its previous pledge to keep rates low at least until the middle of 2013 as more than two years of economic growth have failed to push unemployment below 8.5 percent. Fed officials in a separate statement today lowered their forecasts for economic growth and inflation this year and in 2013. “What they’re doing is setting the table for some sort of additional monetary easing,” said Scott Minerd, chief investment officer in Santa Monica, California for Guggenheim Partners LLC. “The changes in the statement from last month de- emphasize growth.” Fed Chairman Ben S. Bernanke, speaking at a news conference after the statements, said that the option of further large- scale bond purchases is still “on the table.” “If inflation is going to remain below target for an extended period and employment progress’’ is very slow, then “there is a case’’ for additional monetary stimulus, he said.

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