Fed Leaves Key Interest Rates Unchanged Again

The Federal Reserve left interest rates unchanged at a meeting of its policy-making committee, reiterating the central bank's vow to keep rates at "extremely low'' levels if necessary through late 2014.

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The Fed's meeting comes as the economy has sent conflicting signals in recent weeks, showing better-than-expected improvement in some measures and disappointing results in others.

An uptick in new claims for unemployment insurance, coupled with slower job growth and durable goods orders in March, has renewed concerns that unemployment could remain high.

Despite the wobbling economy, the Fed was expected to keep interest rates steady, and wasn't expected to launch another stimulative round of bond purchases yet, said Dean Maki, chief economist at Barclays Capital in New York.

Instead, investors are anticipating new economic forecasts by the Fed's policy-making committee that the Fed is scheduled to release before Chairman Ben Bernanke's press conference around 2:15 p.m. ET this afternoon. In particular, they are waiting to see whether the bank has cut its estimates for the unemployment rate or raised its forecasts for economic growth and inflation.

If the Fed signals that it now believes unemployment will fall more rapidly or that inflation would rise faster than previous forecasts, that might indicate it would raise rates sooner than late 2014 or be less likely to increase bond buying, Maki said.

"There is less slack than they thought,'' said Maki. "It could start to change interpretation of how much slack there is in the economy.''

The Fed is more likely to pump money into the economy by buying bonds if the economy is growing far more slowly than its estimated potential, and less likely if it is growing almost as fast as it can without sparking inflation, said John Canally, chief economic strategist at LPL Financial, a Boston asset management firm.

With the economy likely to grow between 2% and 2.5% this year, the Fed may hold off indefinitely on more bond buying, also known as quantitative easing or QE, Canally said.

"Not needing more QE should be good for the economy,'' Canally said.

Inflation hawks are hoping the Fed doesn't launch another round of bond buying, said Brian Wesbury, chief economist at First Trust Portfolios. Concern about inflation have risen recently, as inflation excluding food and energy prices has been at or above the Federal Reserve's target levels, he said.

"Its not the Fed's job to fix every problem in the economy,'' Wesbury said in a presentation this week. "For Ben Bernanke to believe it's the Fed's job to bring unemployment down, even though Congress is spending and creating the conditions for slower growth and higher unemployment, I believe that is a terrible mistake.''