The US Federal Reserve expects to keep short-term interest rates close to zero "at least through late 2014" – longer than previously indicated – chairman Ben Bernanke said as he expressed concerns about the pace of the recovery.
The decision means the Fed fears the economy will not fully recover from the recession that started in 2008 for at least another two years. "I don't think we're ready to declare that we've entered a new, stronger phase at this point. We'll continue to look at the data," Bernanke said at a press conference.
The Fed's pessimism contrasts with Barack Obama's positive message about the economy in his state of the union speech on Tuesday night, and underlines the scale of the challenge he faces to convince American voters to give him a second term.
"While indicators point to some further improvement in overall labour market conditions, the unemployment rate remains elevated," the Fed said in a statement released after a two-day meeting. "Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed."
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