Forex News – Fed keeps interest rates unchanged

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The Federal Reserve announced it has decided to maintain its benchmark interest rate at 0.25 percent as expected. It acknowledged that the pace of U.S. economic recovery was proceeding more slowly than it had expected though it was primarily because of temporary factors, such as high energy prices and the events in Japan due to the earthquake.

Ben Bernanke, US Fed Chairman, said record-low interest rates are still needed to spur a recovery that remains “frustratingly slow” two years after the recession ended. Recent labor market indicators have been weaker than anticipated,” the statement said.

“The slower pace of recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply-chain disruptions associated with the tragic events in Japan,” the Fed said in a statement at the conclusion of a two-day meeting.

The Fed said it was ending its planned $600 billion bond-purchase program at the end of June as planned.

“The Committee will complete its purchases of $600 billion of longer-term Treasury Securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings,” the Federal Open Market Committee said today in a statement after a two-day meeting in Washington. “The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected.”

After the FOMC statement, the US Dollar rose against the Japanese Yen, from 80.05 to 80.16 within two minutes. The greenback also jumped against the Swiss Franc from a pre-news low of 0.8348 to a high of 0.8372 within minutes, as the Dollar gained strength since the market has already discounted the fact that the interest rates would not be changed.