Monday, December 24, 2012
US Federal Reserve publically link unemployment and interest rate
Federal Reserve Commits to Monetary Targets
The United States Federal Reserve Board announced on December 12th, 2012, it would link changes in the interest rate to a specific level of unemployment and inflation. You can read the press release here.
The "Fed" also it would continue to buy mortgage backed securities and to extend the duration of Treasury holdings.
The committee said that it would keep the federal funds rate between 0% and 0.25% as long as the US national unemployment rate stayed above 6.5% and the two year forward interest rate was below 2.5%. The fed left some room for changes if conditions changes. This is the fist time the fed has directly linked the interest rate to the unemployment rate and the the inflation rate.
The move by the federal reserve should also counter some bogus arguments by conservatives and Republicans that Obama's policies have contributed to uncertainty in the business environment.
If you want to real more about the Fed's internal discussion to fix the rates, you can read a Bloomberg Business Week story here.
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