Fed sticks with plan to hold interest rates at record lows through 2014

Pink piggy bank in a vise

It seems the Federal Reserve is more upbeat about the job market and overall economy than it's been in years.

But it's not upbeat enough to give savers a break and alter its policy of driving interest rates to record lows.

The Fed's rate-setting committee ended a two-day meeting by reiterating support for its two most important policies.

The government-controlled bank influences how much savers earn on short-term deposits by setting what's called the federal funds rate -- the interest rate banks pay to borrow money that other banks have on deposit with the Federal Reserve.

It's been essentially zero since December 2008 and the Federal Open Market Committee said Tuesday that it plans to keep it there through late 2014 -- at least.

By standing by that decision, which it first announced in August, the committee seemed to ensure that savers will continue to earn record-low returns on certificates of deposit and money market and savings accounts for two to three years.

We just reported that the best nationally available 24-month CDs are paying just 1.26% APY this month. Need we say more.

The Fed also said it would continue with what's been dubbed Operation Twist. This involves shifting $400 billion in Fed holdings from short-term to long-term bonds in an effort to drive down longer-term interest rates.

The bank's governors justify their policy of pushing interest rates far below what a free and open market would provide as an attempt to pull the nation out of the 2008-09 recession.

While providing commercial banks with cheap money might punish savers, it allows those banks to offer low-cost loans to everyone from business owners to home buyers.

Although the Fed said it still expected sluggish economic growth this year, it acknowledged there was improvement, particularly in the job market.

"Labor market conditions have improved further, the unemployment rate has declined notably in recent months but remains elevated," the committee said in its statement.

The Fed's determination to hold interest rates low, and a report that shows retail sales growing by a stronger-than-expected 1.1% in February, has the Dow Jones Industrial Average up more than 100 points as I'm writing this and back over 13,000.

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