Fed will continue to keep rates low

Federal Reserve officials agree, mostly, to continue buying in securities to ensure interest rates stay low. The Fed repeats that it doesn't see changing its policy until the unemployment rate falls below 6.5%.

By Charley Blaine Jan 30, 2013 4:33PM
US currency © liquidlibrary, JupiterimagesUpdated: 4:40 p.m. ET.

The Federal Reserve told financial markets Wednesday that it plans to keep interest rates low and continue its big bond-buying programs until the nation's unemployment rate improves substantially.

The unemployment rate in December was 7.8%, and the Labor Department will report on January unemployment and payroll employment on Friday.

While the central bank set no deadline on when it might stop buying bonds, it did say the purchases will stop someday. Just don't expect an abrupt change of policy.

The decision was entirely expected. Even the one dissent -- from Esther George, president of the Federal Reserve Bank of Kansas City -- was expected.

The stock market was down slightly ahead of the Fed decision and moved a bit lower afterward. The Dow Jones industrials ($INDU) closed down 44 points to 13,910 -- unable to top 14,000 for the first time since 2007.

The decision, announced at 2:15 p.m. ET, means interest rates will remain at ultra-low levels. The Fed is continuing its policy of keeping the target on the federal funds rate, the rate banks charged each other for overnight loans, at 0% to 0.25%.

That's great for borrowers. Mortgage rates should remain low. That means a 30-year loan might cost around 3.6%, according to Bankrate.com. Auto-loan rates should continue to be low by historical standards, around 2.6%.

The federal government will enjoy low interest costs. The yield on the 10-year Treasury note was at 2.006% Wednesday afternoon. That's up from Tuesday's 1.988%.

The Fed's decision is, of course, not great for savers.

The central bank said the economy had "paused" in recent months. Mostly that was due to the effects of Superstorm Sandy. But it sees domestic growth resuming "at a moderate pace," with unemployment declining gradually.

The Fed had nothing to say about the current debate between Democrats and Republicans over spending priorities. It did note that financial stresses globally have "eased somewhat." But there are still big risks at work.

To keep rates low, the Fed will continue a policy of so-called quantitative easing. It will  buy mortgage-backed securities at a rate of $40 billion a month. It will buy longer-term Treasury securities at a rate of $45 billion a month.

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11Comments
Jan 30, 2013 5:34PM
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As usual they are penalizing the senior citizens that have saved for their retirements.  It is like the federal reserve wants us to be poor and dependant..  I think that is what the liberals wants.  The  entire population poor and dependant on the government.  That way the loser that voted for Obambo can feel equal to the people that work for a living

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan 30, 2013 5:29PM
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And the Fed continues to punish savers and reward spenders to the tune of 85 billion a month in future debt to be paid off by the next 10 generations of economic slaves. Hooray for Obama - Hooray for rich Uncle Benjie - Hooray for Wall Street Banksters all of whom are too important to prosecute accroding to timid little Timmy G - on his way back to his crooked pals at GS - he did his job and will now be rewarded.  Is it not reassuring to know that it makes such an enormous difference when one party or the other run things?....................
Jan 30, 2013 5:29PM
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Well, we have an economy addicted to Fed printing.  When it stops, the addict will have to go cold turkey.  We will then know if the printing drug is worth the withdrawals.  I don't think so.
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I just continue to tell myself, "Keep paying down debt, and things will get better."
Jan 30, 2013 5:47PM
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What has to boggle us all is-- that keeping the Bank Rate this close to ZERO while letting it's member banks buy their own Debt Notes above the Bank Rate (instant profit on paper), the Federal Reserve has created a no-win scenario. It's takes 300 basis points to make and service debt. If the mortgage rate is below 5%, the maker-bank cannot cover it's internal, servicing and collections overhead. There is NO WAY this will pan out positively. The Fed has to go. Banks are busted. Wall Street isn't helping America so it goes too. Time for change we can remotely believe in.
Jan 30, 2013 4:56PM
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