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Fed signals close-to-zero rates

business Updated: Aug 11, 2011 00:31 IST
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The US Federal Reserve said on Tuesday that it will keep interest rates near zero for at least another two years. In a divided decision, the US central bank also signalled that it was prepared to do more if necessary, noting that it still has tools available for spurring growth.

Three officials voted against the decision to pledge rock-bottom interest rates until mid-2013. It was the first triple dissent against a decision by the policy-setting Federal Open Market Committee since November 1992.

The Fed said US economic growth was proving considerably weaker than expected, suggesting that inflation, which has already moderated recently, will remain contained for the foreseeable future.

"The committee currently anticipates that economic conditions - including low rates of resource utilisation 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 mid-2013," the Fed said.

Analysts said the Fed's language left open the possibility of a third round of bond-buying, or quantitative easing.
Economists have cut their forecasts for third-quarter growth to an annualised 2.3% from 3.1% in July.

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