The Fed announced that it plans to keep short term interest rates near zero through 2014. It believes that its inflation target of 2% will be satisfied and the unemployment will gradually fall over this period. The growth rate that it forecasts will keep the employment to population rate at a higher than normal level since the number of new jobs created will not be sufficient to absorb the entry of new workers in the labor market.
Low interest rates will be good for the stock market since bonds and bank accounts will not provide much yield. It should also be good for banks. They will be able to borrow at low rates from the Fed and purchase treasuries at a profit. The low rates are not expected to do much for business investment. Loan standards for small businesses remain high.
No comments:
Post a Comment