1.25.12: Fed Expected to Hold Rates Low Until 2014

On Wednesday, the Federal Reserve, citing ongoing concerns for a global economic slowdown and a stubbornly weak U.S. labor market, said it expects to keep record-low interest rates in place at least until late 2014. Fed Chairman Bernanke said the Central Bank stands ready to take additional action to kick start the weak U.S. economy, but he stopped short of saying the Fed was planning any future bond purchase programs.

“We are prepared to take further steps in that direction if we see that the recovery is faltering or if inflation is not moving toward target. It’s an option that’s certainly on the table,” Bernanke said. He also addressed the Central Bank’s new inflation target of 2%, saying that goal could be overlooked if it meant bringing down unemployment.

Also on Wednesday, the Fed released the forecasts of its policymakers for the first time. The release revealed a wide disparity among members of the FOMC on when the U.S. recovery might start gaining traction.  When taken as a whole, Bernanke explained, the forecasts led to the decision to push back any discussion to raise interest rates until late 2014.

“This is positive news for CMBS conduit and most other commercial loan borrowers,” commented Michael D. Sneden, Executive Vice President of ValueXpress.  “CMBS bonds tightened in response and CMBS loans rates are solidly in the mid-5% area now, down from 5.75% a week ago.”

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