Tuesday
September 30, 2014

Fed Plans to Keep Interest Rates Low

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Fed Plans to Keep Interest Rates Low

The Federal Reserve announced Wednesday that it plans to keep interest rates low as long as the unemployment rate is above 6.5 percent. This was the first time that the Fed has ever identified an exact unemployment rate to be reached before it plans to raise interest rates. 

To push rates lower, the Fed will continue to buy $85 billion in Treasury securities and mortgage-backed securities each month until the unemployment rate improves. 

Since December 2008, the Fed has held short-term interest rates near zero. The move has helped reduce borrowing costs and helped mortgage rates reach all-time lows. 

Many of the Fed’s senior officials say they do not expect the unemployment rate to reach 6.5 percent until the end of 2015. 

In November, the unemployment rate was 7.7 percent. The last time it was below 6.5 percent was September 2008. 

Source: “Fed Ties Rates to Joblessness, With Target of 6.5%,” The New York Times (Dec. 12, 2012)