Fed Keeps Short-Term Interest Rates Low

Federal Reserve officials said they expect short-term interest rates to stay close to zero "at least through late 2014." The Fed has been trying to give more explicit guidance on what it expects in the future as part of a broader move to greater transparency.

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ROBERT SIEGEL, HOST:

These days, each time the Federal Reserve meets, an announcement soon follows that interest rates will stay low - very low. Well, today it happened again. The Fed predicted that rates will remain low through late 2014.

That's a longer time period than in past statements. It was an attempt to reassure financial markets, as NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: At a press conference after the end of the Fed's two-day meeting, Chairman Ben Bernanke said the U.S. economy is expanding moderately, and labor market conditions are improving. But he said the data in areas like retail sales and business investment is still mixed.

DR. BEN BERNANKE: We are, obviously, hoping that the strength we saw in the fourth quarter, and in recent data, will continue into 2012. But we're going to continue to monitor that situation. I don't think we're ready to declare that we've entered a new, stronger phase at this point.

ZARROLI: For that reason, he said, the Fed is unlikely to raise rates for at least two years - and possibly longer. Fed officials have never made such a long-range projection about rates. But Bernanke wants to send a message to businesses and consumers that they can expect cheap credit for an extended period, as a kind of confidence-building gesture. Bernanke also noted that the Fed is ready to step up its efforts to pump money into the economy by buying long-term securities, if it thinks it's appropriate.

In saying that, Bernanke was essentially shrugging off complaints from inflation hawks, who warned that the Fed is sowing the seeds of higher prices down the road.

Today's meeting was the first time the Fed released projections from individual members about where they expect interest rates to be in the years to come. It's part of an ongoing effort by the Fed to be more transparent about how it operates. Six of the 17 policymakers think rates could go up this year or next, but five think they won't go up until 2014. And another six think it won't happen until 2015 or '16.

Bernanke made clear that these are projections only, and that predicting the future path of the economy is a difficult thing to do.

BERNANKE: I think it's important to emphasize that we're not going to mechanically take the interest rate projections that participants provide, and just build policy off of that.

ZARROLI: But Bernanke said, like a business, the Fed has no choice but to try to make projections as best it can.

Bernanke and the Fed increasingly have become targets of criticism in recent years. And the attacks have increased during the Republican primary campaign. The Fed chairman was asked what he thought about the attacks. He smiled ever so slightly, and said he wouldn't get involved in political rhetoric.

Jim Zarroli, NPR News.

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