The Federal Reserve's policy committee released it's statement regarding potential monetary policy on Wednesday. Contrary to speculation, the Federal Reserve has said that it does not intend to raise interest rates in the United States until later in 2014. By keeping the short-term interest rate close to zero for at least another two years, the Federal Reserve has suggested that it is pessimistic about the United States chances of a speedy recovery from the current recession.
While indicators point to some further improvement in overall labour market conditions, the unemployment rate remains elevated, the Fed said in it's official statement. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed.
The Fed also published a quarterly economic forecast for the first time, in which the committee members evaluated how long the short-term interest rate should remain near zero. Bernanke said 11 of the 17 members felt interest rates will be less than or equal to 1 percent in 2014, while the remaining six members believed they will be higher. The Fed also forecasts an unemployment rate between 8.2 percent and 8.5 percent at the end of this year and possibly 7 percent by the end of 2014.
There has certainly been some encouraging news recently, said Bernanke. At the same time we have had mixed results in other areas, such as retail sales, and we continue to see headwinds from Europe.