WASHINGTON (AP) — The Federal Reserve went further than ever Wednesday to assure consumers and businesses that they'll be able to borrow cheaply well into the future.
The Fed pushed back the earliest date for any likely increase in its benchmark interest rate by at least a year and a half, until late 2014. It said record-low rates are still needed to help boost an improving but still sluggish economy.
The central bank said in a statement after a two-day policy meeting that the economy is growing moderately, despite some slowing in global growth. It held off on any further bond-buying programs to try to increase growth.
The Fed described inflation as "subdued." That was a more encouraging description than it offered last month, when it said inflation had "moderated since earlier in the year." A more positive outlook on prices gives the Fed more room to keep rates low.
Treasury yields fell on the news. Lower yields could help further reduce mortgage rates and possibly boost stock prices as investors shift out of lower-yielding Treasurys.
Stocks, which had traded lower all day, quickly recovered their losses. The Dow Jones industrial average, which had been down about 60 points before the announcement, was up just three points shortly after it
The statement was approved on a 9-1 vote. Jeffrey Lacker, president of the Richmond regional Fed bank, dissented. He objected to the new time frame for a rate increase.
The extended time frame is a shift from the Fed's previous plan to keep the rate low at least until mid-2013. Some economists said the new late-2014 target could lead to further Fed action to try to invigorate the economy.
Chairman Ben Bernanke will discuss the updated economic forecasts and Fed policy at a news conference later.
The central bank has kept its key rate at a record low near zero for three years. Beyond the adjusted outlook for interest rates, Wednesday's statement closely tracked the Fed's previous comments about economic conditions.
