Ben Bernanke indicates U.S. interest rates will stay low

The pound hit a thirteen month high against the U.S. dollar of $1.63, as the U.S. Federal Reserve Chairman, Ben Bernanke, said yesterday that that the bank would keep rates “exceptionally low” for an “extended period”. He also said the Fed would be ready to increase the programme of quantitative easing (where the Fed buys bonds) if necessary in order to maintain economic growth. The news helped to move U.S. stocks into positive territory, as the period of "easy money" looks like continuing for some time yet.

A further weakening in the U.S. dollar means that commodities, which are priced in dollars, will continue to rise, adding to inflationary pressures.

U.S. Federal Reserve in surprise increase in emergency loan rate

The FTSE 100 was recently up 8 points and Dow Futures were off 50 points on the news that the U.S. Federal Reserve was to begin lifting its benchmark lending rate earlier than previously thought. The Fed announced last night that it would lift the rate it charges banks for emergency loans by a quarter percentage point from 0.5% to 0.75%. It is considered unlikely that the more important Fed Funds rate will rise anytime soon as economic recovery is still weak.