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Fed rate vow signals recovery is a long way off


economy

Fed rate vow signals recovery is a long way off

The US Federal Reserve has said it is not likely to raise interest rates from their current exceptionally low levels until at least the back end of 2014.

That is even later than investors had expected and is part of an effort to improve the sluggish recovery in the world’s largest economy.

After a two-day policy meeting, Fed Chairman Ben Bernanke and his policymakers did not make any major revisions in their outlook for the economy, saying it still faces “significant downside risks”.

The central bank described the US unemployment rate as still elevated and said it does not see any problems with inflation.

With regard to business investment, the Fed said that has slowed and downgraded its assessment from the December meeting.

Officials are biding their time in determining whether more monetary stimulus is needed offered little to suggest it was close to launching another round of bond-buying to prop up growth.

The Fed has also launched a potentially controversial push to revive the battered US housing market which many economist see as essential to boosting economic growth. Policymakers would like to see moves to help borrowers reduce their mortgage payments.

House prices have fallen 33 percent from their 2006 peak, resulting in an estimated $7 trillion in household wealth losses, the Fed said last week as it took the unusual step of making an array of recommendations on housing policy to Congress.

Currently, about 12 million homeowners are stuck paying mortgages for amount more than their properties are worth, a situation which affects roughly half of all mortgage borrowers in states suffering from the worst of the slump, such as Florida and Nevada.

Fed officials are trying to use the central bank’s influence to overcome political resistance to expanding the government’s role in housing, which has been an important driver for the U.S. economy as it emerged from past recessions.

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