WASHINGTON -- Federal Reserve policy makers, worried about companies' inability to create new jobs, held interest rates at a 45-year low yesterday and signaled they will be slow to order any future increase that could cramp the economy's recovery.
Private economists viewed the Fed policy statement as more somber than its comments after a similar meeting in late January, reflecting the fact that the central bank has seen two disappointing monthly employment reports since then.
Some economists said it was very likely the Fed would not raise its target for the federal funds rate, the interest that banks charge each other, from 1 percent until sometime in 2005. That represented a change from the previous view that the Fed simply would wait until after the November election before starting to raise rates.
That would be good news for borrowers who are already enjoying the lowest interest rates in more than four decades. Commercial banks' prime lending rate, the benchmark for millions of consumer and business loans, has been at 4 percent, the lowest level since 1958, since the Fed last cut rates by a quarter-point last June.
And receding worries about possible Fed rate hikes have helped to push long-term rates down as well with the nationwide average for 30-year mortgages dropping last week to 5.41 percent, approaching the four-decade low set last year.
Wall Street ended the day with the Dow Jones industrial average up 82 points at 10,185. In January the central bank also left rates unchanged but dropped a promise it had been making since August to leave rates alone for ''a considerable period," raising fears among investors that a rate hike might be imminent.
However, at both the January meeting and this week, the Fed noted that ''with inflation quite low and resource use slack," Fed officials believe they ''can be patient" in deciding to start raising interest rates. And where the Fed's statement in January had looked ahead to ''an improvement in the labor market," the new comments on the labor market were much more subdued, saying that ''although job losses have slowed, new hiring has lagged."
Adding to the worries about job growth, economists said the Fed is also concerned about what last week's terrorist attack in Spain could do to fragile consumer and business confidence at home.
The eight-month recession in 2001 was relatively shallow, but the economy has struggled for the past two years to generate new jobs, in part because businesses have chosen to get more production out of existing workers.