WASHINGTON — The economy is growing, but only weakly.
Layoffs have slowed, yet jobs remain scarce. And interest rates will need to rise — but not any time soon.
That was the mixed picture sketched Wednesday by the Federal Reserve, which pledged to hold rates at a record low to reduce unemployment and sustain the recovery. And the assessment was reinforced by government data on inflation, homebuilding and U.S. trade.
Fed Chairman Ben Bernanke and his colleagues did sound a more optimistic note by pointing to the slowdown in job losses. But they made clear the recovery is far from strong: Consumer spending remains sluggish, the job market weak, wage growth slight and credit tight. Companies are wary of hiring.
In the meantime, the Fed isn’t wavering from its commitment to keep its bank lending rate at zero to 0.25 percent, where it has stood since last December. It said again it will keep rates there for an “extended period.”
In response, commercial banks’ prime lending rate, used to peg rates on home-equity loans, certain credit cards and other consumer loans, will remain about 3.25 percent. That’s its lowest point in decades.
Super-low interest rates are good for borrowers who can get a loan and are willing to take on more debt. But those same low rates hurt savers.
Low inflation is one sign of the economy’s weakness. Companies are finding it hard to raise prices because consumers fearful for their jobs remain wary of spending much.
That was clear from a Labor Department report Wednesday on consumer prices. Prices did rise last month.
But after stripping out volatile energy and food prices, inflation disappeared last month. That gives the Fed leeway to hold its key interest rate steady to aid the recovery.
At the same time, home construction rebounded in November after a setback in October. And applications for new building permits rose more than economists had predicted.
Also, the government said its broadest measure of foreign trade posted a sharp increase in the July-September quarter, signaling higher demand for foreign goods. That, too, is seen as a sign of a slowly strengthening economy.
