Will the Fed keep rates low?
The Federal Reserve pledged Wednesday to hold rates at record lows to help with the recovery and unemployment. But its decision drew a dissent from one member, showing new thinking on when we need to pull back stimulus money.
The Fed showed that there is weakness in bank lending which is contracting. On the positive side, the Fed said business spending on equipment and software seems to be rising.
The Fed did say it intended to end a $1.25 Trillion program aimed at driving down mortgage rates as scheduled on March 31, 2010.
Will the Fed keep the pledge to keep rates low? Thomas Hoenig president of the Federal Reserve Bank of Kansas City said the economy has improved sufficiently to drop the pledge, which has been in place for nearly a year.
At some point the Fed must give up on the low rates and focus on pulling back the stimulus money. Fed Chairman Ben Bernanke is in trouble in the confirmation hearings and seems to be focused on that for the time being.
In a statement, the Fed says it can keep rates low because inflation shouldn't be a problem. So, for now the answer is yes the fed will keep rates low.
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