Page last updated at 19:49 GMT, Tuesday, 16 March 2010

US interest rates 'to stay low', resolves Fed

Federal Reserve chairman Ben Bernanke
The Fed's chairman Ben Bernanke has backed low interest rates

The US Federal Reserve has repeated its pledge to keep interest rates at record lows in order to nurture the economic recovery.

The Fed said its main interest rate would be kept at the current 0% to 0.25% range, as widely expected.

Its rate-setting committee said that data on the US economy painted a mixed picture of the recovery from recession.

That meant rates would remain at "exceptionally low levels... for an extended period", the committee said.

It added that rates could be kept low because inflation was expected to remain subdued in the near future.

US markets reacted positively to the news, with the Dow Jones Industrial Average rising 30 points following the announcement.

Jobs market 'stabilising'

But the Fed's view of the economy was mixed. It said the jobs market in particular had shown signs of improvement and was now stabilising.

But it warned that continued high unemployment could hit future consumer spending, with "employers reluctant to add to payrolls".

Earlier Timothy Geithner, the US treasury secretary, echoed those sentiments.

"Over the past year [the jobs market] has changed from uncontrolled freefall to approximate stability," he said, in a statement to the US House of Representatives.

However he warned that while job losses had "slowed to a trickle", he did not expect significant increases in hiring this year.

The Fed also warned that the property sector was still a cause for concern, with investment in commercial property in decline and bank lending continuing to contract.

Its policy of buying up mortgage-backed securities to support mortgage lending is expected to come to an end this month.

Some analysts have expressed concern that mortgage rates could begin to rise once the Fed's support is withdrawn.



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