Federal Funds Rate to Remain Near Zero

The U.S. Federal Reserve is likely to keep benchmark interest rates near zero for a while in an economy that is pulling out of a steep decline and appears on course for a very gradual recovery, Fed Vice Chairman Donald Kohn said Saturday.

"The economy is only now beginning to show signs that it might be stabilizing, and the upturn, when it begins, is likely to be gradual amid the balance sheet repair of financial intermediaries and households," Kohn told a conference at Princeton University.

"As a consequence, it probably will be some time before the FOMC will need to begin to raise its target for the federal funds rate," he said, referring to the Fed's policy-setting Federal Open Market Committee...

"To ensure confidence in our ability to sustain price stability, we need to have a framework for managing our balance sheet when it is time to move to contain inflation pressures," he said.

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