No changes from the Fed

By Peter Schroeder - 03/13/12 02:32 PM ET

The Federal Reserve, weighing an improving labor market and spiking gas prices, decided to hold steady on its policy of bottomed out interest rates through 2014.

In a statement issued Tuesday, the central bank announced it was not altering its previous plan of keeping interest rates near zero at least to the end of 2014, saying it expects the economy to grow "moderately" in the coming months as the unemployment rate "gradually" drops.

The statement from the Federal Open Market Committee (FOMC) showed the Fed pulled in two directions by recent economic developments. On the one hand, the Fed noted the recent run of positive jobs reports, saying the unemployment rate had "declined notably" in recent months — the jobless rate has fallen to 8.3 percent from 8.9 percent in October.

It also noted that while problems in global financial markets, headlined by the European debt crisis, remain a threat, they have "eased" recently.

However, it also acknowledged the recent spike in oil-and-gas prices. The Fed said the increase, which has become an economic focal point for Capitol Hill and the White House, could temporarily boost inflation, but remains confident that prices will remain under control over the long term.

Financial markets are closely watching for hints that the Fed might embark on a third bond-buying spree to boost a slow economic recovery, but the central bank gave no indication in its newest statement that another round of "quantitative easing" would be forthcoming.

Rather, Federal Reserve Chairman Ben Bernanke has repeatedly told lawmakers that the major challenges facing the economy now lie largely out of its control, warning that the Fed's powers are not a catch-all "panacea." He has called on policymakers to address the deficit over the long term while supporting the immediate recovery.

Nine of the 10 current members of the FOMC supported Tuesday's statement. Jeffery Lacker, president of the Federal Reserve Bank of Richmond, was the lone dissenter, as he did not believe economic conditions warranted such low interest rates for the next two years.