Fed Won T Raise Interest Rates Until Unemployment Levels Drop
As expected, the interest rate wasn't changed after the Fed's two-day meeting. Yet what did surprise Wall Street was the pledge to leave the benchmark interest rate near zero until 2015 when it expects the unemployment rate will ease to 6.5%, providing inflation stays within its 2% target.
For years the Fed has been dedicated to controlling inflation as its primary focus, but with the current unemployment rate at 7.7%, Bernanke is committed to driving down this figure. Yet economists are worried about the future state of the economy since the target date of 2015 for an increase in interest rates suggests the economy won't be strong until then.
However Bernanke has stressed that the Fed will tweak its policy according to economic conditions and will raise interest rates before then if inflation gets uncomfortable.
Central bankers will also be adding to the current monetary stimulus, and will commit to purchasing $45 billion in treasuries a month. These new purchases are expected to inflate the current balance by $1.1 trillion.
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