Fed keeps key interest rate low

Tom Hoenig, president of the Federal Reserve Bank of Kansas City, remained the sole dissenting voice on the Federal Open Market Committee as it once again voted to keep short-term interest rates low.
The FOMC is the policy-making committee of the Board of Governors of the Federal Reserve System. It announced on Tuesday its decision to keep short-term interest rates between zero and 0.25 percent in an effort to stimulate the economy.
That’s because the committee expects the pace of economic recovery to be slower than previously anticipated.
The FOMC said household spending is increasing gradually, but it’s being curbed by high unemployment , modest income growth, lower housing wealth and tight credit. Business spending on equipment and software is rising, but employers still aren’t eager to hire.
The federal funds rate, the overnight interest rate banks can charge to lend money to other banks through the Federal Reserve, is the main tool the Fed uses to control the economy. With the decision not to change the rate, it remains at its lowest level in 65 years.
In addition to keeping interest rates low, the committee decided to maintain current levels of long-term securities in its portfolio by rolling them over into new securities as they mature.


Read more: Fed keeps key interest rate low; Hoenig is lone dissenter again - Kansas City Business Journal