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Fed likely to stick to low rates

By Martin Crutsinger

Associated Press

Published: Tuesday, Jan. 29 2013 8:47 p.m. MST

In this Monday, April 4, 2011, file photo, Federal Reserve Chairman Ben Bernanke addresses a financial markets conference meeting, in Stone Mountain, Ga. Ben Bernanke's term as chairman of the Federal Reserve expires one year from Thursday, Jan 31, 2013, Sometime between now and then he's likely to take his foot off the gas pedal of financial stimulus that is helping to fuel the still-weak U.S. recovery and begin tapping on the brakes. (AP Photo/David Goldman)

Associated Press

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WASHINGTON — When the Federal Reserve meets this week, it's likely to affirm a message it intends to help lift the economy: that consumers and businesses will be able to borrow cheaply well into the future — even after unemployment has dropped sharply.

Last month, the Fed signaled for the first time that it will tie its policies to specific economic barometers. It said that as long as the inflation outlook is mild, it could keep short-term rates near zero until unemployment dips below 6.5 percent from the current 7.8 percent.

That could take until the end of 2015, the Fed predicted last month.

The Fed's guidance was designed to give consumers, companies and investors a clearer sense of when super-low borrowing costs might start to rise. Though some key sectors of the economy are improving, analysts think the Fed still feels more time is needed for low rates to spur borrowing, spending and economic growth.

One reason is that many Americans remain anxious about the budget impasse in Washington.

"The Fed is dealing with a lot of uncertainty right now, with all the decisions still to be made on federal budget policy," said Diane Swonk, chief economist at Mesirow Financial, who expects the Fed to make no changes in its support programs when its two-day policy meeting ends Wednesday.

At its December meeting, the Fed said it would keep spending $85 billion a month on bond purchases to keep long-term borrowing costs down. It will continue its bond purchases until the job market improved "substantially."

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