Low Interest Rates Here to Stay, Says US Central Bank

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Byline: Alex Brummer and Roger Baird

AMERICAN interest rates will remain close to zero until at least 2014, the US central bank the Federal Reserve announced last night.

The long period of low interest rates is unprecedented and some members of the policymaking Open Markets Committee signalled that they do not expect interest rates to start rising until 2015 or 2016.

The interest rate projections suggest that the Fed and its chairman Ben Bernanke are far from confident that America has fully recovered from the 2008 financial crisis and recession despite 15 unbroken months of falling unemployment.

The Fed's caution was demonstrated by its decision to lower its projected growth range for the US economy to 2.2pc to 2.7pc against the previous figures of 2.5pc to 2.9pc.

But the it is hopeful that a combination of low interest rates and modest growth will be enough to keep the unemployment rate dropping.

It believes that the jobless rate will end the year at 8.2pc to 8.5pc of the total workforce, down from its previous estimate of 8.5pc to 8.7pc.

The continued progress on the jobs front will be seen as helpful to President Barack Obama as he seeks re-election in November.

For the first time the Fed has set an inflation target of 2pc. This brings its operations in line with other major central banks, including the Bank of England, which have a single target for price rises. …