For the first time, the Federal Reserve has explicitly linked interest rates to unemployment.
Rates will remain near zero "at least as long" as unemployment remains above 6.5 percent and if inflation is projected to be no more than 2.5 percent, said the Federal Open Market Committee in a statement Wednesday.
Put to one side the question now obsessing stock and bond traders -- whether the new standard means higher interest rates will kick in sooner than the middle of 2015, which had been the Fed's previous position.
By linking interest rates directly to the rate of unemployment, Bernanke is explicitly acknowledging that the Federal Reserve Board has two mandates -- not just price but also employment. "The conditions now prevailing in the job market represent an enormous waste of human and economic potential," said Fed Chairman Ben S. Bernanke.
These are refreshing words at a time when Congress and the White House seem more concerned about reducing the federal budget deficit than generating more jobs.
But the sad fact is near-zero interest rates won't do much for jobs because banks aren't allowing many people to take advantage of them. If you've tried lately to refinance your home or get a home equity loan you know what I mean.
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