Ben Bernanke's Federal Reserve Fed Funds Target Rate Holds Steady at 0% Fed Statement Today Key

Washington, DC – The Federal Reserve Bank has voted to hold steady the Fed Funds Target rate at 0.00% to 0.25%.  The current effective daily rate is 0.20%.  The Fed Funds target rate has been at 0.00% to 0.25% since December 16, 2008.

The Federal Funds Rate is the interest rate at which private banks lend balances at the Federal Reserve to other banks, usually overnight.  It is the effective interest rate banks charge each other for loans.

The Chairman of the Federal Reserve Ben Bernanke has supported the decision to leave rates unchanged at 0% for nearly 17 months in order to stimulate an economic recovery.  The financial crisis of 2008 has resulted in unprecedented Federal Reserve intervention in an attempt to stave off a further financial meltdown.

The Fed Statement released today with the decision to hold rates steady provides clues into the thinking at the Federal Reserve on future interest rate decisions.

Todays Fed Statement:

“The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

In the Federal Reserves Last Statement on March 16th stated the following with regard to the economy:

“Economic activity has continued to strengthen…the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.”

On March 16th the Federal Reserve made the following statement regarding interest rates:

“economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period”

There was NO SIGNIFICANT CHANGE in the Fed Statement today to the above statement as the Fed pledged to keep interest rates steady for “an extended period”.