The US Federal Reserve is expected to keep US interest rates at historic lows when it meets later Wednesday, as it tries to keep a languishing recovery on track. The Fed’s top rate-setting body is widely expected to keep its main rate of borrowing at between zero and 0.25 percent to help spur economic growth.
Faced with reams of data showing the recovery is still fragile, the debate over whether the Fed should quickly raise rates to stave off inflation has all but disappeared in recent months. The Fed’s announcement will still be keenly watched as investors look for any hint that a double-dip recession is on the way, or that the worst of the danger has passed.
Jobs growth remains anemic with employers still reluctant to add permanent positions during the fragile recovery. The unemployment rate is expected to hover near 10 percent for quite some time as the economy regroups after the worst downturn since the Great Depression of the 1930s Consumers have been cautious about spending, which normally drives about two-thirds of the activity in the world’s largest economy.
Confronted with these challenges to recovery, the Federal Open Market Committee (FOMC) was expected to reiterate that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Ryan Sweet at Moody’s Economy.com said, “The nearly double-digit unemployment rate and vanishing core inflation strongly suggest the Fed will not begin to normalize interest rates until the second quarter of 2011, or later.”