Among the recent price consolidation, it should not be forgotten that the U.S. Federal Open Market Committee of the Federal Reserve Board decided to leave rates at 0.0% to 0.25% until at least late 2014, according to the FOMC statement released on January 25th.
In their statement, “the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that 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.”
In addition, the Fed indicated on January 25th that it would release the projected direction of interest rates by its seventeen members and would take the historic move of setting an inflation target of two percent. Nevertheless, putting off the first possible adjustment to rates until late 2014 somewhat eclipsed the Fed’s apparent intention of increasing transparency, while at the same time sending further signals for diversifying out of paper.
Bernanke reassures market that the Fed has options
In the press conference following the FOMC statement, Fed Chair Ben Bernanke clarified that the decision to leave interest rates unchanged for over three years was not cast in stone. He noted that the bank’s capacity to forecast out that far was limited, but that the Fed could adjust rates depending upon economic conditions.
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