This week's meeting of the Federal Open Market Committee proved fairly eventful, particularly because there were no significant changes to monetary policy.
The developments include the first press conference of the year given by Federal Reserve Chairman Ben Bernanke, and a new addition to the Fed's Summary of Economic Projections showing the forecast of the federal funds rate.
The statement released after the meeting contained the news the federal funds rate might remain at the current level -- between zero percent and 0.25 percent -- until late 2014.
The time-frame extension was illustrated by the new forward guidance released before the press conference, showing the projected path of the federal funds rate.
The federal funds rate
The Fed released two charts related to projections on the federal funds rate. The first chart revealed the timing of a rate increase favored by all FOMC participants, the Federal Reserve board members and the regional bank presidents.
Source: Federal Reserve.
The majority of members believe the most appropriate time for a rate increase will be 2014. But there are three members who favor a rate increase this year and three who prefer 2013. The participants supporting a rate increase sooner rather later are outnumbered by those who would put it beyond 2014 -- four voted for 2015 and two put a rate increase as far out as 2016.
The second chart shows the pace at which participants believe the federal funds rate should be increased based on current economic conditions.
Source: Federal Reserve.
Nearly all Fed members put the federal funds rate at 0.25 percent at the end of this year. One participant voted for 0.5 percent, and two believe short-term interest rates should rest at 1 percent by the end of 2012.
For the end of 2013, one Fed member forecasts a federal funds rate of 2 percent. Save for one other outlier voting for a rate of 1.75 percent, the majority put the federal funds rate at the end of next year at 0.25 percent.
Even so, four members forecast a rate between 0.5 percent and 1 percent.
Only six FOMC members forecast the federal funds rate at 0.25 percent in 2014. Other members' forecasts spanned 0.5 percent to 3.75 percent.
Questions and answers
Bernanke discussed the new forecasts at the press conference following the meeting. He stressed the forecasts were not unconditional promises but instead projections based on current information.
The chairman admitted the ability to forecast three or four years was limited. "It's certainly possible that we will be too optimistic or too pessimistic," Bernanke said.
"Even if the economy were a bit stronger, the rates would still be appropriate. Unless there is substantial strengthening, we would be keeping rates low for some time," he said.
More quantitative easing, or QE, could be on the table as well.
During the question-and-answer period, one reporter asked about the size of the balance sheet and the chairman acknowledged that expanding the balance sheet remains an option, particularly if the progress towards maximum employment remained inadequate or if inflation moved sharply away from the committee's target.
Bernanke also acknowledged the current policy does hurt savers but noted savers and everyone else would be better served by a healthy economy.
"Savers are dependent on a healthy economy to get adequate returns. People own stocks, bonds and Treasury securities, and if the economy is in really bad shape, they are not going to get returns. When the economy goes into a bad situation, low interest rates are needed, which will lead to higher returns for all savers and investors," he said.
The silver lining is the attention to price stability, which minimizes consumer losses to inflation, he said.
The preservation of buying power may be cold comfort to savers who may face even lower deposit rates in the coming year.
"As far as deposit interest rates, this tells me they will remain at a record low and possibly even go further down," says Dan Geller, executive vice president at Market Rates Insight, a consulting firm to financial institutions.