Its Forecast Dim, Fed Vows to Keep Rates Near Zero
By BINYAMIN APPELBAUM
NYT
WASHINGTON — The Federal Reserve made a rare promise on Tuesday to hold short-term interest rates near zero through at least the middle of 2013, in a sign that it has all but written off the chances of an expansion strong enough to drive up wages and prices.
It is now conventional wisdom among forecasters that the economy will plod along through the end of President Obama’s first term in office. Millions of Americans will not find work. Wages will not rise substantially.
By its action, the Fed is declaring that it, too, sees little prospect of rapid growth and little risk of inflation. Its hope is that the showman’s gesture will spur investment and risk-taking by convincing markets that the cost of borrowing will not rise for at least two years.
The Fed’s statement, with its mix of grim tidings and welcome aid, contributed to wild market oscillations as investors struggled to make sense of the economy and the path ahead. The day ended in a huge upward surge on the New York Stock Exchange — the second busiest day this year after the record volume on Monday, during a deep sell-off — that could not be tallied completely until well after the markets had closed.
(More here.)
NYT
WASHINGTON — The Federal Reserve made a rare promise on Tuesday to hold short-term interest rates near zero through at least the middle of 2013, in a sign that it has all but written off the chances of an expansion strong enough to drive up wages and prices.
It is now conventional wisdom among forecasters that the economy will plod along through the end of President Obama’s first term in office. Millions of Americans will not find work. Wages will not rise substantially.
By its action, the Fed is declaring that it, too, sees little prospect of rapid growth and little risk of inflation. Its hope is that the showman’s gesture will spur investment and risk-taking by convincing markets that the cost of borrowing will not rise for at least two years.
The Fed’s statement, with its mix of grim tidings and welcome aid, contributed to wild market oscillations as investors struggled to make sense of the economy and the path ahead. The day ended in a huge upward surge on the New York Stock Exchange — the second busiest day this year after the record volume on Monday, during a deep sell-off — that could not be tallied completely until well after the markets had closed.
(More here.)
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