The Federal Open Market Committee, the Fed’s policy arm, today voted without dissent to keep the fed funds target rate at 0.00% to 0.25%. While “economic activity has continued to pick up” and “activity in the housing sector has increased,” the overall economy remains weak. “Low rates of resource utilization (Fedspeak for “not enough people have jobs”), subdued inflation trends and stable inflation conditions” permit the Fed to encourage business and personal borrowing by keeping the rate target at “exceptionally low levels…for an extended period.”
This is extremely good news, particularly as the vote was unanimous. The worst thing the Fed could do in this environment is raise the cost of borrowing too soon. That the economy is no longer in the ICU does not mean it has returned to health.
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