The Federal Reserve pledged for the first time to keep its benchmark interest rate at a record low at least through mid-2013 in a bid to revive the flagging recovery after a worldwide stock rout.
The Federal Open Market Committee discussed a range of policy tools to bolster the economy and said it is “prepared to employ these tools as appropriate,” it said in a statement today in Washington. Three members of the FOMC dissented, preferring to maintain the pledge to keep rates low for an “extended period.”
The decision represents the biggest effort since November to spark the U.S. economy and revive confidence while stopping short of initiating a third round of large-scale asset purchases. Chairman Ben S. Bernanke and his colleagues acted after reports showed the economy was slowing and an unprecedented downgrade to the U.S. credit rating sent stocks tumbling from Sydney to New York.
The Fed offered a dimmer view of the economy than it did in the last statement in late June. “Economic growth so far this year has been considerably slower than the committee had expected,” it said. The Fed also said it expects a “somewhat slower pace of recovery over coming quarters,” adding that “downside risks to the economic outlook have increased.”
Devaluation: you're doing it wrong!