Fed pledges to hold rates at record lows
WASHINGTON - The Federal Reserve pledged yesterday to keep a key interest rate at a record low for an “extended period,’’ in a sign that the economy is growing but remains deeply dependent on government help.
The Fed said economic activity has “continued to pick up’’ and that the housing market also has grown stronger, a key ingredient to a sustained recovery.
But Fed chairman Ben Bernanke and his colleagues warned that rising joblessness and hard-to-get-credit for many people and companies could restrain the rebound in the months ahead. “Economic activity is likely to remain weak for a time,’’ they said.
Against that backdrop, the Fed kept the target range for its bank lending rate at zero to 0.25 percent. And it made no major changes to a program to help drive down mortgage rates.
Commercial banks’ prime lending rate, used to peg rates on home equity loans, certain credit cards, and other consumer loans, will stay at about 3.25 percent, the lowest in decades.
Normally, the Fed controls only short-term rates. But after the financial crisis erupted the Fed began buying longer-term Treasuries, keeping those rates lower than they’d otherwise be.
This is good news for borrowers with auto loans, some student loans, 15- and 30-year fixed-rate mortgages and some adjustable-rate mortgages. But it hurts savers and people dependent on fixed incomes who would normally be enjoying higher yields.
