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Federal Reserve Expected to Keep Interest Rates Low Despite Signs of Recovery

The economy may be taking baby steps towards recovery, but it looks like the Federal Reserve will most likely keep interest rates at their existing low levels. The committee concluded this in a meeting, and is expected to make an announcement sometime soon. Analysts say that the Federal Reserve is proceeding cautiously and do not want to increase the rates in the short term.

The interest rate has hovered around the 0-0.25 per cent range since 2008. By keeping the rate at such rock-bottom levels, the Federal Reserve is attempting to fuel an economic recovery by encouraging spending and keeping costs of borrowing low. Federal Reserve Chairman Ben Bernanke stressed that it was important to maintain the present low rates to ensure that the economic turnaround is sustainable and unemployment rates dip to lower levels.

The unemployment rate is currently at 9.7%. As of March 2010, companies have lifted a freeze on recruitment. This month, Wall Street announced that it was hiring finance professionals. Tech jobs are also seeing a comeback, with jobs for software and electrical engineers returning to 2008 levels.

The housing market showed slight improvements in the first three months of 2010, but it is still very fragile. Prices of houses have seen an upward trend and the demand for new homes has also seen an increase. But the inventory of foreclosed homes is rapidly building up, which is a cause for concern.

The sorry state of the United States housing market is being blamed on the unethical activities of Wall Street big wigs such as Goldman Sachs, which is being sued by a number of states. Goldman Sachs has been accused selling risky financial products whose performance was tied to the American housing market. The company profited in hundreds of millions when the market hit record lows and defaults on mortgage soared.

The automobile sector and other industrial sectors have seen increased sales numbers, compared to last year’s figures. Industrial output has also increased by 0.7 percent from 2009. The USA Today/IHS Global Insight Economic Outlook predicts that GDP growth will see an increase of more than 4 percent through May and forecasts better numbers in the coming months.

The recovery has been slow but steady. The Federal Reserve , however, has chosen to take a middle ground and analysts predict that that the prevalent low interest rates will be maintained till the end of this year.