This fiscal year, the rates of the Federal Reserve have remained mostly unchanged. After a policy-setting meeting today, officials of the Federal Reserve have reiterated that rates will remain at low levels for an extended period of time. And with that announcement, there continues to be uncertainty about a possible recovery of the economy in the near future.
On average, economists do not see any chance of rates of the central bank changing before 2011. The ‘economic forecasting survey’ conducted this week by The Wall Street Journal had a similar toll when expectations of economists to see an increase in rates were very bleak. The current 0-0.25% rates seem longstanding as the futures markets expect a 45 % chance of its sustenance. Paul Ballew of Nationwide says that “There are lots of reasons to stay on the sidelines– no reason to move.”
Discouraging statements by Fed Officials have further validated that rates won’t be moving up soon. Currently, there are many challenges that confront the economy and lead to low-inflation rates. Some of the challenges that we face today are- disappointing retail sales, a slow down in the housing market, high levels of jobless claims, and worries about the European fiscal challenges. So, there are “two-sided” concerns about inflation. Bruce Kasman at J.P. Morgan Chase says that “Even with growth, high unemployment, and low inflation will keep the Fed sidelined.” After today’s meeting, the Fed committee communicated more uncertainty with rates to stay low over an extended period of time.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to