Financial Watch

The U.S. Federal Reserve decided to leave interest rates unchanged, saying the current recovery will not result in rampant inflation, the board announced Wednesday.

The central bank kept the target range for its federal funds at between zero per cent and one-quarter of one percentage point, a record low level for the benchmark rate.

The Federal Open Market Committee (FOMC) — the group that meets concerning interest rates — said the U.S. recovery is still in an early enough stage that increased industrial production will not translate into higher prices any time soon.

Fewer US workers made first-time claims for jobless benefits last week, giving hope that accelerating economic growth would soon translate into job creation, official figures showed on Thursday.

Initial jobless claims fell by 11,000 to 448,000, according to the Department of Labor. Analysts were hoping for a bigger fall, but the decline brought claims to the lowest level in a month.

However, the less volatile four-week average of jobless claims remains elevated and rose last week by 1,500 to 462,500. Economists argue that claims need to fall to the low 400,000 level before US employers will begin adding consistently to payrolls.

Failing to curb federal budget deficits would do “great damage” to the U.S. economy in the long run, Federal Reserve Chairman Ben Bernanke warned Tuesday.

Bernanke again urged the White House and Congress to come up with a credible plan to reduce the nation’s red ink, which hit a record $1.4 trillion last year.

Failing to do so would push interest rates higher — not only for Americans buying cars, homes and other things — but also for Uncle Sam to service its debt payments, he said.

All that would sap national economic activity and could cause employers to cut back on hiring, Bernanke said.

The index of U.S. leading indicators rose in March by the most in 10 months, a sign the economy will keep growing into the second half of the year.

The 1.4 percent increase in the New York-based Conference Board’s measure of the outlook for three to six months was more than anticipated and followed a revised 0.4 percent gain in February.

Manufacturers are ratcheting up production and factory workers are putting in longer hours as companies rebuild inventories and ship more goods overseas. Further improvement in the job market will help sustain the economy’s recovery from the worst recession since the 1930s.

Interest rates rose in the bond market Wednesday after a range of reports signaled that the economy is recovering.

Prices on most Treasurys fell, driving yields higher.

Demand for safety holdings like Treasurys fell after Federal Reserve Chairman Ben Bernanke said the economy is recovering. Economic reports and improved quarterly earnings at chipmaker Intel Corp. and the big bank JPMorgan Chase & Co. bolstered the sense that business conditions are getting better.

The yield on the benchmark 10-year Treasury note maturing in February 2020 rose after a three-day slide. The yield advanced to 3.87 percent in late trading from 3.82 percent Tuesday. Its price fell 11/32 to 98 1/32. The 10-year yield is linked to rates on mortgages and other consumer loans.

Federal Reserve Bank of Richmond President Jeffrey Lacker said the U.S. economy will probably expand at a moderate pace for the rest of this year as spending by consumers and businesses picks up.

The Labor Department’s report of 162,000 jobs added to payrolls in March was the “most encouraging sign” yet of a recovery, and the “risk of a pronounced decline in inflation has diminished substantially,” Lacker said yesterday in a speech in Morgantown, West Virginia.

Lacker stopped short of endorsing any change to Fed monetary policy. Last month, Fed officials reiterated a pledge to keep rates very low for an “extended period,” citing employers’ reluctance to add jobs and depressed home building.