Fed votes to hold course on rates

Binyamin Appelbaum / New York Times News Service /

Published Mar 21, 2013 at 05:00AM

WASHINGTON — The Federal Reserve produced no surprises on Wednesday, affirming that it would plow ahead with its efforts to stimulate the economy even as it hailed “a return to moderate economic growth following a pause late last year.”

The Fed under its chairman, Ben Bernanke, has made clear that it regards its program of low interest rates and large asset purchases as necessary for the economy to keep growing fast enough to return unemployment to normal levels.

In a statement issued after a two-day meeting of its policymaking committee, the Fed reiterated that it would continue to hold short-term interest rates near zero at least until the unemployment rate falls below 6.5 percent, which forecasters expect no sooner than 2015. The February unemployment rate was 7.7 percent.

To hasten that process, the central bank said it also would continue to buy $85 billion a month in Treasury and mortgage-backed securities.

While spending by consumers and businesses has increased recently, the Fed noted that fiscal policy “has become somewhat more restrictive.”

“The committee continues to see downside risks to the economic outlook,” the statement said.

The decision was supported by 11 members of the Federal Open Market Committee. Esther George, the president of the Federal Reserve Bank of Kansas City, recorded the only dissent, as she did in January, again citing her concerns that the Fed’s efforts could destabilize markets and seed future inflation.

The unusual rigidity of the Fed’s basic course has diminished the importance of the regular meetings of its policymaking committee. Unless economic circumstances change dramatically, the year could pass without significant action.