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US Federal Reserve to keep benchmark interest rate low

THE US Federal Reserve said its benchmark interest rate will stay low until at least late 2014 and anticipates that unemployment will remain high and inflation "subdued."

"The committee expects to maintain a highly accommodative stance for monetary policy," the Federal Open Market Committee said in a statement released in Washington yesterday.

The Fed extended its previous pledge to keep rates low at least until the middle of 2013 as more than two years of economic growth have failed to push unemployment below 8.5pc. Fed officials in a separate statement yesterday lowered their forecasts for economic growth and inflation this year and in 2013.

"What they're doing is setting the table for additional monetary easing," said Scott Minerd, chief investment officer in Santa Monica, California for Guggenheim Partners.

"The changes in the statement from last month de-emphasise growth."

Stocks rose and Treasuries extended gains after the statement.

The Fed also lowered its forecast for growth this year to between 2.2pc and 2.7pc, down from a projection of between 2.5pc and 2.9pc in November. It predicted the economy next year will expand between 2.8pc to 3.2pc, down from a previous forecast of 3pc to 3.5pc. (Bloomberg)

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