Federal Reserve to Keep Low Interest Rates Until 2014

Written by: PrimeRateNews Staff

Federal Reserve to Keep Low Interest Rates Until 2014

After the conclusion of its Federal Open Market Committee (FOMC) meeting on January 25, the Feds announced it would maintain record–low interest rates well into 2014.  Many analysts interpret the announcement as a sign that the FOMC do not expect the economy to grow much faster between now and the end of 2014.

According to the Federal Open Market Committee, despite a sluggish global economy, the U.S. economy has expanded at a moderate pace. Consumer spending accounts for most of the growth. In fact, businesses have actually curtailed spending on fixed investments, which consist of physical assets like building, land, machinery, vehicles, and technology.

In addition, despite a series of positive news regarding housing indicators, the sector continues to weigh down the U.S. economy.

The Feds forecast an economic growth rate of 2.2% to 2.7%, for this year.

Although Committee members expressed hopefulness about the state of unemployment in the nation, as the rate declined from 8.5% in November to 8.2% for December, slow economic growth will cap job growth.

On the inflation front, the Feds believes inflation will remain at or below its objective of two percent going into future quarters.

The Federal Reserve Act of 1913

Over 100 years ago, the U.S. Congress passed The Federal Reserve Act of 1913. This controversial piece of legislation gave the Federal Reserve System, often called the “Feds,” the power set the nation’s monetary policy.

The Act establishes a Federal Reserve System, which consists of 12 Federal Reserve District Banks — Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.

Each Federal Reserve District Bank has a board made up of nine directors. The Bank directors have responsibility for supervising its’ activities, which include the selection of a president. The president functions as chief executive officer and serves a five-year term. The Federal Reserve System’s Board of Governors must approve the Bank’s choice of CEO.

Federal Reserve District Banks supervise depository institutions in its region. They provide a variety of services to those institutions as well as the public. They also help determine monetary policy by monitoring and reporting on economic developments in their region of the country.

Board of Governors, FOMC and Monetary Policy

The seven members of the Board of Governors serve on the 12-member Federal Open Market Committee (FOMC), which has, which has the primary responsibility for developing the country’s monetary policies.

The other members of the FOMC are the president of the Federal Reserve Bank of New York and four presidents selected from a grouping of three Federal Reserve Banks, who serve one-year terms on a rotating basis.

The FOMC determines monetary policy, which denotes certain actions taken by the Feds. These actions affect the availability of money, credit and interest rates as it relates to supporting the economic goals of the country.


Federal Reserve to Keep Low Interest Rates Until...

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