The Federal Open Market Committee (FOMC) today (Wednesday) announced that it would leave its benchmark federal funds rate at a record low range of 0-0.25% for an extended period, despite recent signs that the U.S. economic recovery is accelerating.
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Most analysts anticipate the Fed will maintain its loose monetary policy well into 2010, as the economic recovery, while gathering steam, remains fragile. Job losses abetted in November and the unemployment rate slid to 10% from a 26-year high of 10.2% in October. And while construction of new homes rose to an annual rate of 574,000 last month - 8.9% above the October rate 527,000 - that's still 12.4% below the 655,000 rate reached in November 2008.
"Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement over recent months," the FOMC said. However, "businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls."