Fed keeps US interest rates low

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Fed keeps US interest rates low

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The US Federal Reserve has held interest rates near zero and renewed its pledge to keep the cost of borrowing very low for a long time.

The central bank’s policy makers are seeing some evidence of an uneven recovery with US economic activity strengthening modestly.

In late February Fed Chairman Ben Bernanke said: “Notwithstanding the positive signs, the job market remains quite weak.”

But in its statement with the rates announcement the Fed said the US labour market was “stabilizing,” a view that was more upbeat than at the last meeting in late January, when the policy-setting committee said only that deterioration in the labour market was “abating.”

The central bank also said business spending on equipment and software had risen “significantly,” which was a brighter assessment than the one it gave in late January.

The Federal Reserve is due to take on a greatly expanded role in financial regulation if legislation on regulatory reform gets through the US Congress.

The chairman of the US Senate Banking Committee Christopher Dodd has unveiled a bill that would give the Fed the power to break up banks and other firms that are too big to fail – that is those that could threaten the stability of the financial system if they suffered serious problems.

But the bill faces a tough passage as Republicans are opposed to new regulation for the US financial sector while some Democrats have said it does not go far enough to safeguard the public.