Fed Holds Rate Steady as Recovery Pace Still Drags Along
By: Jeff Cox
The Federal Reserve, citing concerns about the pace of recovery, held its key interest rate near zero and indicated the economy would have to improve substantially for any changes in policy to take place.
The central bank gave no indications toward any further easing measures would take place, a key consideration as the stock market looks for direction. Stocks have come off their highs following a robust rally that began in October, shortly after the Fed introduced its last easing program.
A 9-1 vote accompanied the statement, which renewed the pledge to keep rates low through 2014. The discount rate remains unchanged at 0.75 percent.
Jeffrey Lacker was the sole committee member to vote against the wording.
The Fed statement comes against a backdrop both of anxiety over the economy and pervasive sentiment that the central bank is unlikely to take any significant easing measures.
With the Operation Twist program coming to an end in June, the Fed is likely to wait for worsening economic conditions before taking action. The Twist is a balance sheet-neutral buying and selling of bonds in an attempt to drive down long-term lending rates.
Bernanke has been under some pressure to tip the Fed's hand more as unemployment is improving but still high, and the housing market remains mired in a climate of dropping prices and middling sales.
The Fed has expanded its balance sheet to nearly $3 trillion through quantitative easing. While QE has coincided with a growth in stock market returns it also has stoked fears of inflation and criticism that the Fed does not have a solid exit strategy to unwind all the debt it has accumulated.
By: Jeff Cox
The Federal Reserve, citing concerns about the pace of recovery, held its key interest rate near zero and indicated the economy would have to improve substantially for any changes in policy to take place.The central bank gave no indications toward any further easing measures would take place, a key consideration as the stock market looks for direction. Stocks have come off their highs following a robust rally that began in October, shortly after the Fed introduced its last easing program.
A 9-1 vote accompanied the statement, which renewed the pledge to keep rates low through 2014. The discount rate remains unchanged at 0.75 percent.
Jeffrey Lacker was the sole committee member to vote against the wording.
The Fed statement comes against a backdrop both of anxiety over the economy and pervasive sentiment that the central bank is unlikely to take any significant easing measures.
With the Operation Twist program coming to an end in June, the Fed is likely to wait for worsening economic conditions before taking action. The Twist is a balance sheet-neutral buying and selling of bonds in an attempt to drive down long-term lending rates.
Bernanke has been under some pressure to tip the Fed's hand more as unemployment is improving but still high, and the housing market remains mired in a climate of dropping prices and middling sales.
The Fed has expanded its balance sheet to nearly $3 trillion through quantitative easing. While QE has coincided with a growth in stock market returns it also has stoked fears of inflation and criticism that the Fed does not have a solid exit strategy to unwind all the debt it has accumulated.
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