Fed decides to keep interest rates down by Zuzana Zelenakova

The Federal Reserve announced once more that it will continue to keep interest rates low until the situation on the markets is stable enough and jobless rates decrease. “Businesses are still cutting back on fixed investment and staffing, though at a slower pace,” the Federal Open Market Committee said in a statement today. “Household spending appears to be expanding, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit.” The general idea is that the economy is getting better gradually but at this point it is still dependent on financial injection from stimulus package. Before the announcement o! f the Fed´s decision regarding the fund rates dollar experienced a broad slide, as much as 1.2 percent. However, the development was only temporary as the dollar gained back again, 0.4 percent. "Following the very sharp gains seen (in the euro and higher risk currencies) in the wake of the Fed decisions, it is not surprising to see a bit of profit-taking, particularly given that equities and commodities have moved lower," said Michael Klawitter, currency strategist at Commerzbank in Frankfurt. When it comes to the world stocks´ reaction to the Fed´s policy decision they slumped. "Investors were pushing the market lower, preparing for more selling by investors such as hedge funds in case U.S. jobs data raises a disturbance," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities. It was also ahead of decisions by the European Central Bank and Bank of England. None of them is expected to raise interest rates. The Fed´s policy of low interest rate! s and purchasing Treasuries and mortgage debt in combination w! ith the Obama administration´s $787 billion stimulus has helped to improve gross domestic product by 3.5 percent in the period from July to September 2009. Without auto industry that was boosted by ´cash for clunkers´ program it would be only 1.9 percent.

related story (sgx15825): http://news.yahoo.com/s/nm/20091105/bs_nm/us_markets_global;...

by Zuzana Zelenakova for PocketNews (http://pocketnews.tv)

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