Wednesday, January 25, 2012

Low Interest Rates to Extend Until at Least 2014. U.S. Federal Reserve Wants to Keep Cheap Money Flowing.

The Federal Reserve Bank of the United States has announced that it intends to keep rates in the basement until at least later 2014. In response, both Canadian and U.S. stock markets moved higher as expectations for a continued economic recovery improved. The reserve indicated in its statement that high unemployment and low economic growth leave it with little option but to keep the overnight lending rate steady between 0 and 0.25 percent, as inflation does not seem to be picking up much steam.

In Canada, job quality has been worsening, with more self-employed and lower wage positions being created. Increased downward wage pressure will help reduce inflationary pressure in the Canadian economy, which helps the Bank of Canada follow its U.S. counterpart in continuing a period of record low interest rates at home as well.

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