The Federal Reserve Bank voted to keep interest rates at near zero for an extended period. Even though there was some discord over approving Chairman Ben Bernanke for a second term, Bernanke was finally approved at the end of the week.
But for the first time in a year, the committee had one dissenting vote, Thomas M. Hoenig, President of the Federal Reserve Bank in Kansas City. He voted against keeping the rate at near zero claiming that economic and financial conditions had improved enough that to extend the period was unwarranted.
Analysts are interpreting the “extended period” to be at least six months, but of course, no one knows for sure. Most economists are forecasting that the Fed will probably begin to raise the rate late in 2010 at the earliest.
The Fed funds rate is the basis for the prime rate, currently at 3.25%, which is used for setting credit card rates, home equity rates, and rates for auto loans.
In their recent statement, the Fed removed the language which it had retained for some time that economic activity was likely to remain weak, instead replacint it with a note of cautious optimism that “economic recorety is likely to be moderate for a time.”