Fed to Keep Interest Rates ‘Exceptionally Low’

BY Jason M. Breslow  December 16, 2009 at 3:14 PM EDT

The Federal Reserve wrapped up its final policy meeting of the year on Wednesday, and, as expected, announced it would keep rates near zero “for an extended period.”

Following two-days of meetings, the central bank’s Federal Open Market Committee voiced optimism about the recovery, saying “economic activity has continued to pick up.”

The Fed’s upbeat assessment suggests it may be nearing an end to some of the emergency measures it put in place during the height of the financial crisis. However, as the Wall Street Journal’s Jon Hilsenrath writes, “They need more evidence that a recovery will be sustainable without so much government support. With the unemployment rate still so high at 10%, they also believe they can afford to wait because there is a lot of slack in the economy that drives down inflation.”

The economy isn’t the only thing Federal Reserve Chairman Ben Bernanke was feeling upbeat about on Wednesday. Earlier today, Bernanke was selected as Time magazine’s “person of the year” for leading “the most important and least understood force shaping the American — and global — economy.” The selection puts the former Princeton University professor in the company of recent winner’s such as President Barack Obama, Russian President Vladimir Putin, and Bono.

The selection comes a day ahead of a Senate Banking Committee vote on whether to confirm Bernanke to a second term as Fed chairman. While Bernanke is expected to win confirmation, he has come under increasing criticism from lawmakers for his role in orchestrating the federal bailout of Wall Street. On Friday, the House passed a bill to overhaul the financial regulatory system that included an amendment that opens the Fed to congressional audits, which Bernanke argues would threaten the central bank’s independence.

On the NewsHour tonight, Jim Lehrer sits down with economist James Galbraith and former Fed Vice Chair Alice Rivlin to discuss Bernanke’s performance before, during, and after the financial crisis.