Cited: CNN

Fed Chairman Ben Bernanke said today that the economy is indeed improving, that the recession is indeed behind us, but things aren’t so rosy that the Fed is about to change its interest rate policy anytime soon; in fact Bernanke believes that the economy is still in such a critical stage of growth that he doesn’t see a change in the Fed Funds rate until sometime in 2014.

Presently, the fed funds rate, basically the liquidity spigot from the U.S. central bank to the financial community, is at historically low levels near zero percent. The fed funds rate is the rate charged on money that works its way around the banking system, the rate that one bank charges another for overnight loans, with the Fed keeping enough in the system to fund these loans. The rates on these loans now have been in place since 2008 when the full grip of the recession threatened to bring down the entire financial system.

The news, or lack of news, regarding interest rates was well-received by the U.S. bond market with the rate on 10 year bonds falling to just 1.9%, down from over 2% in yesterday’s trading session. Economists warn however, that while Bernanke did say that Fed Funds rates would probably not change until sometime in 2010, his words are by no means etched in stone. Should economic activity, and especially growth in the U.S. jobs market, start gaining a full head of steam, the Fed Chairman and the Fed Open Market Committee, the voting arm of fed policy, could reverse course quickly and start to let rates rise to cut off any possible inflationary effects of faster economic activity.

The Fed announcement follows its two-day meeting after which the central bank tells the world what they are thinking behind closed doors, or at least some of what they are thinking, regarding the economic outlook for the U.S., the global outlook, as well as some details about their approach to monetary policy, which is followed most closely by the financial community.

The FRB also changed a few members on the 10 member board of fed voters, a regularly scheduled happening at the Fed, with some governors considered to be more in line with Bernanke’s approach than some of the outgoing voters. The new faces will help to ensure that any additional measures taken by the Fed to keep the economy rolling will meet with little or no opposition when it comes to a vote.

My take:

No one expected any change in the Fed’s interest rate policy from the conclusion of today’s meeting. It would certainly be nice to see that in providing the financial community with virtually limitless funds at no cost they would also make some mention of getting the banks to open their wallets a little and to put more of this money….our money….to work getting more people back to work. While it is not the job of the fed to use the bully pulpit to manipulate behavior, it wouldn’t be the worst thing for someone in a position of real power to acknowledge the problem, identify the culprits, and let them know that their behavior has not gone unnoticed.