January 24, 2012 in Business

Fed expected to keep rates flat till 2014

Associated Press

WASHINGTON — It could be quite a while yet before the Federal Reserve starts raising the interest rates it’s kept at record lows for three years.

Maybe not before 2014.

That’s the thinking of many analysts as the Fed prepares this week to provide more explicit clues about how long short-term rates will likely stay near zero.

Starting when their policy meeting ends Wednesday, Fed members plan to forecast the direction of those rates four times a year. The clearer guidance will accompany the Fed’s usual quarterly predictions of growth, unemployment and inflation.

The new hints about rates are part of a Fed drive to make its communications with the public more transparent. The more immediate goal is to assure consumers and investors that they’ll be able to borrow cheaply well into the future.

No announcements are expected Wednesday of any further Fed action to try to lift the economy. Most analysts think Fed members want to put off any new steps, such as more bond purchases, to see if the economy can extend the gains it’s made in recent months.

That’s true even though this year’s new roster of voting members on the Fed’s policy panel suggests fewer voters would likely oppose further steps to boost the economy. Twice last year, Fed action to try to further lower long-term rates drew three dissenting votes out of 10.

Instead, expectations are focused on the likelihood that the Fed’s first quarterly forecast of interest rates will signal no rate increase is probable until at least 2014. That would mark a shift. Since August, the Fed has said in policy statements that it planned to keep its benchmark rate at a record low until at least mid-2013, as long as the economy remained weak.

The Fed has already taken numerous unorthodox steps to try to strengthen the economy. Since 2008, for example, it’s kept its key rate, the federal funds rate, at a record low between zero and 0.25 percent.

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