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Fed upbeat on economy but will keep record rates

March 13, 2012 • Business, National News


FILE – In a Feb. 17, 2011 file photo Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, before the Senate Banking Committee. Federal Reserve policymakers will meet Tuesday March 13, 2012 in Washington. (AP Photo/J. Scott Applewhite/File)

WASHINGTON (AP) — The job market’s gains may endure. Record-low interest rates will, too.

Those signals emerged Tuesday from the Federal Reserve after its latest policy meeting. The Fed sketched a slightly sunnier view than it did in January, when it announced a plan to hold short-term rates near zero through 2014 to help the economy.

Since then, a stream of reports has pointed to a steadily strengthening economy. Employers have added more than a half million jobs. Retail spending has picked up. Even the housing market is stirring.

Yet few expect the Fed to drop its plan to keep short-term rates near zero for nearly three more years. Not anytime soon.

A pullback from that timetable could jolt investors. As long as inflation stays tame, analysts say, the Fed will likely decide to hold rates down if it feels they’re still helping the economy.

Mark Zandi, chief economist at Moody’s Analytics, said the core question for the Fed isn’t whether the economy is strengthening. Rather, it must decide whether the gains might falter, as they have at times since the recession ended in June 2009.

For now, the Fed isn’t announcing any new steps to boost the economy. But it isn’t ruling them out, either.

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