Chairman of the Federal Reserve Ben Bernanke has today said US interest rates will need to stay low in order to keep the economic recovery on track.
In a testimony before Congress, Bernanke said there was a “nascent economic recovery” and said long-term recovery will depend on private sector’s demand for goods and services.
Bernanke, who was recently awarded a second four-year term as chairman of the US central bank, added that as a result of subdued inflation and high unemployment, low interest rates are required for “an extended period”.
Interest rates have been at the rate of between zero and 0.25% since December 2008.
The announcement came just a week after the US central bank stunned markets by raising its discount rate (the interest rate it charges banks for emergency loans) by 25bps to 0.75%.
The Fed said the decision came “in light of continued improvement in financial market conditions” but said the changes “do not signal any change in the outlook for the economy or for monetary policy”.
In related news today, the Commerce Department has revealed a fall in sales of new homes in the US for the month of January - the third consecutive month that sales have fallen.
According to the Commerce Department, new single-family home sales dived by 11.2% to a seasonally adjusted annual rate of 306,000 units - the lowest since records commenced in 1963.
Meanwhile, US consumer confidence took a dive in February after the closely-monitored Consumer Confidence Index from the Conference Board fell to a 10-month low of 46, down from a revised 56.5 in January.
The index still remains far away from the 90 points required to show that the world’s largest economy is on solid footing.
Furthermore, the reading is still below the reading of 61.4 recorded in September 2008 - at the height of the global financial crisis. Since the index commenced in 1967, the average reading has been 95.6.
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