US Fed Keeps Rates at Record Low, Rejects Inflation Fears

Washington, March 16 (DPA) The Federal Reserve Tuesday kept interest rates at their record low of near zero percent and continued to give priority to promoting the US economic recovery, rejecting fears that higher oil prices could push up inflation.

The Fed's benchmark federal funds rate would remain at 0-0.25 percent "for an extended period". The central bank also kept in place an unprecedented effort to inject money into the economy by buying up $600 billion in government bonds by the end of June.

The move ignored calls from some economists for the Fed to pay greater attention to inflation fears and runs counter to the European Central Bank, where its chief Jean-Claude Trichet has signalled that interest rates could be raised in April to avoid higher prices.

The Federal Open Market Committee's decision was unanimous, despite signs of some divisions on the 11-member board. Two board members have signalled they would prefer to see the controversial bond purchases, launched in November, scaled back or ended early.

Despite a sharp rise in global oil prices in recent weeks, brought on by unrest in Libya and pro-democracy protests in the wider Middle East, the Fed's board said its US inflation expectations over the long term "remained stable".

The US economy meanwhile was on a "firmer footing" this month than when the central bank board last met at the end of January. The labour market was also "improving gradually", after the jobless rate dropped to 8.9 percent in February from 9.8 percent in November.

The higher price of oil and other commodities, including food, was expected to be "transitory", the Fed said, rejecting worries from some economists that the rise in commodity prices could have a more sustained impact on inflation in the US.

Consumer prices have risen 1.6 percent over the last 12 months, and the central bank said unemployment remained "elevated" compared with the low level of inflation, justifying the Fed's ongoing efforts to prop up the world's largest economy.

But the Fed said it would "pay close attention to the evolution of inflation and inflation expectations".


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Title: US Fed Keeps Rates at Record Low, Rejects Inflation Fears

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