US Fed set to keep interest rates near zero for 'extended period'

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The Independent Online

The Federal Reserve has kept US interest rates at rock-bottom levels, and issued a policy statement seemingly designed not to rock the boat while markets digest the European sovereign debt crisis.

The steady-as-she-goes approach will be extended today by President Barack Obama when he announces three new appointments to the Federal Reserve Board, including president of the Federal Reserve Bank of San Francisco, Janet Yellen; to be vice-chairman under Ben Bernanke.

Also expected to be joining the seven-member board are Sarah Raskin, the Maryland Commissioner of Financial Regulation, and Peter Diamond, an economist at the Massachusetts Institute of Technology. Observers say the new faces are unlikely to change the outlook for monetary policy.

US rates will remain at the zero-0.25 per cent range first targeted in December 2008, the Fed said yesterday, and that would remain the case “for an extended period”. As well as retaining that phrase, the committee repeated a policy statement from its last meeting in mid-March almost word for word. It did, however, recognise that the US labour market is beginning to improve. “Although the pace of economic recovery is likely to be moderate for a time, the committee anticipates a gradual return to higher levels of resource utilisation,” it said.