Federal Reserve to keep interest rates low even after economy regains health

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The Federal Reserve has said it will no longer use the US unemployment rate as its definitive yardstick for gauging the strength of the economy.

It could keep interest rates unusually low even after the US job market returns to full strength and inflation rises to the central bank’s target.

The Fed had previously pledged to hold the cost of borrowing at record low levels until the jobless rate fell below 6.5 percent.

Janet Yellen, the central bank’s new head, said it was a change in guidance rather than policy

On deciding when to raise interest rates the Fed now says it will rely on a wide range of measures – including unemployment and inflation.

As expected the Fed’s Open Market Committee continued to trim its stimulus buying of bonds – something which it has been doing to inject money into the US economy and help it recover.

It will cut the bond purchases from 65 billion dollars to 55 billion a month.

On the labour market, Fed officials new forecasts see unemployment dropping slightly faster, to between 5.6 percent and 5.9 percent by the end of next year.