US Fed keeps rates at just above zero
“The Federal Open Market Committee has continued to maintain the target range for the fed funds rate at 0.25%”
US Federal Reserve chairwoman Janet Yellen says the fed will continue to keep lending rates low for the next few months.
“The Federal Open Market Committee (FOMC) has continued to maintain the target range for the fed funds rate at 0.25%,” she says.
In her testimony to the US Senate banking committee – the first of her two days of testimony on Capitol Hill – Ms Yellen outlined that before the Fed feels confident enough to raise rates, it will want to “feel confident that the recovery will continue and that inflation is moving up over time.”
“If economic conditions continue to improve – as the committee anticipates – the committee will at some point begin considering an increase in the target range for the Fed funds rate, on a meeting by meeting basis.”
The FOMC meets roughly every six weeks.
She says the FOMC judged in December and January that it can be patient in beginning to raise the Fed's interest rates.
She says this reflects the fact that inflation continues to run well below the committee’s 2% objective and room for sustainable improvements in labour market conditions still remains.
“The FOMC’s assessment that it can be patient in beginning to normalise policy, means that the committee considers it unlikely that economic conditions will warrant an increase in the target range for the Fed funds rate for at least the next couple of FOMC meetings.
“There has been important progress toward the FOMC’s objective of maximum employment.
“However, despite this improvement, too many Americans remain unemployed or underemployed, wage growth is still sluggish and inflation remains well below our longer run objective,” she says.
Harbour Asset Finance fixed income director Christian Hawkesby told NBR online earlier this month if the Fed does decided to hike its rates, New Zealand is likely to see the US dollar continue to strengthen and the New Zealand dollar will weaken against the greenback.
He added that it could also result in New Zealand’s long-term interest rates rising back up.
Jason Walls
Wed, 25 Feb 2015
Wed, 25 Feb 2015
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US Fed keeps rates at just above zero
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