Forex News – Fed keeps rates unchanged, no more policy easing

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The Federal Reserve announced it has left the key interest rate unchanged at 0.25 percent, signalling it will leave rates at historic lows near zero, until mid-2013. The US central bank also indicated that it will not take any more steps to ease monetary policy, due to downside risks to the economy.

As long as unemployment remains high and the inflation outlook stays “subdued,” the Fed pledges to keep rates low. The target federal funds rate has been in a range of zero to 0.25 percent since December 2008.

The FOMC (Federal Open Market Committee) completed its two-day meeting in Washington and released the following statement:

“Economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year.”

The Fed committee repeated “there are significant downside risks to the economic outlook, including strains in global financial markets.”

The statement may reflect the desire of policy makers led by Fed Chairman Ben Bernanke to see if the unconventional policy steps unveiled at their last two meetings help the expansion gain strength before embarking on new initiatives. While the economy grew last quarter at the fastest pace in a year, that is still insufficient to push down the unemployment rate, and officials have said the U.S. remains vulnerable to shocks from the European debt crisis.

All FOMC members voted to keep policy unchanged with no more easing expect one dissenter, Chicago Fed President Charles Evans who voted against the decision and favoured “additional policy accommodation.”

The U.S. dollar pared losses against the euro after the announcement.