I'm afraid the Fed has pushed out its low-rate pledge from mid 2013 to late 2014. Here's an excerpt from today's FOMC policy statement:
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
In its statement the Fed admitted that "the economy has been expanding moderately", but it still felt it necessary to to extend out its low-rate pledge by a year and a half.
New regional Fed presidents are voting members this year, and only one appears to be an inflation hawk. Jeffrey M. Lacker, the Federal Reserve Bank President of Richmond, voted against the action. According to the FOMC statement he "preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate."
When the Fed came out with its mid-2013 pledge last August, it wasn't good for deposit rates. Savings account and CD rates went down quite a bit in the months after the announcement. So if you had been thinking about CDs, it would probably be better to act sooner rather than later. If you're trying to decide how long to go and the importance of early withdrawal penalties, you might want to review the following two posts:
- Choosing Long-Term CDs with the Highest Rates
- Choosing the Best Long-Term CDs with Mild Early Withdrawal Penalties
The new FOMC forecast of the federal funds rate is scheduled to be released soon. This won't be that interesting now that we have this late-2014 pledge. Also, Bernanke will be holding a press briefing starting at 2:15pm ET. It'll be interesting to see how Bernanke justifies the late-2014 pledge.
Update 3:50pm: Bernanke's Press Briefing In Bernanke's press briefing, he once again acknowledged the negative effects that low interest rates had on savers. However, he basically said that the health of the economy is a higher priority. His exact words were "The savers in our economy are dependent on a healthy economy in order to get adequate returns."
In terms of the late 2014 pledge, he implied that this isn't written in stone. However, the Fed will probably have to see dramatic improvements in the economy before they would pull in expectations of higher rates.
The Fed also released its economic projections and the new fed funds rate forecasts. This Calculated Risk Blog post has a good review of these projections.
Future FOMC Meetings
The next two FOMC meetings are scheduled for March 13 and April 24-25.