Earlier this week, the Federal Reserve pledged to keep interest rates at a record low in an effort to decrease the nation’s double-digit unemployment rate and maintain the slow economic recovery. Chairman Ben Bernanke noted that consumer spending remains sluggish and companies are still wary of hiring so the Fed vowed to keep interest rates at the current range of zero to 0.25 percent for an “extended period.”
The Fed said it has the ability to hold rates at this super-low level because inflation is expected to remain subdued for some time. The current super-low interest rates are helpful for borrowers who qualify for a loan and are willing to take on more debt, but low rates hurt savers. Bernanke, who is seeking a second term as the Fed chairman, stated that his main goal is to maintain the country’s economic recovery. In addition, Bernanke has sought to assure skeptical lawmakers and investors who believe the Fed’s cheap-money policies will stoke inflation.
On a positive note, the economy finally posted growth in the third quarter, after four consecutive losing quarters and signs suggest further growth in the fourth quarter of this year. Consumer spending was up in October and November but elevated unemployment and tight credit will likely restrain shoppers during the remainder of the holiday season.