By The Associated Press
Fed sends clearer signal on keeping rates low
The Federal Reserve sent its clearest signal to date Wednesday that it will keep interest rates super-low to support the U.S. economy even after the job market has improved.The Fed said it plans to keep its key short-term rate near zero until the unemployment rate reaches 6.5 percent or less â¿¿ as long as inflation remains tame. The unemployment rate is now at 7.7 percent. That plan adds detail to what the Fed said before. It expects to keep interest rates low until at least mid-2015. It's the first time the Fed is making it clear to investors and consumers that it will link its actions to specific economic markers. ___ US economy could withstand brief fall off 'cliff' It's the scenario that's been spooking employers and investors and slowing the U.S. economy: Congress and the White House fail to strike a budget deal by New Year's Day. Their stalemate triggers sharp tax increases and spending cuts. Those measures shrink consumer spending, stifle job growth, topple stock prices and push the economy off a "fiscal cliff" and into recession. The reality may be a lot less bleak. Even if New Year's passed with no deal, few businesses or consumers would likely panic as long as an agreement seemed likely soon. And tax increases and spending cuts could be rolled back after Jan. 1. The impact of tax increases would be felt only gradually. Most people would receive slightly less money in each paycheck, if payroll tax cuts vanish. ___ Small businesses already slipping off the 'cliff' Going over the fiscal cliff could have a range of negative ramifications for small businesses. If people have to pay higher taxes, they will likely spend less. Businesses will hold off on hiring or making investments that could help them expand. Federal budget cuts will put billions in government contracts in jeopardy.
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