The Federal Reserve recently published the minutes of the Federal Open Market Committee meeting held on March 13, 2012. With one exception, Ben Bernanke and each of the Federal Reserve Regional Presidents signed on to a plan which will continue to hold interest rates at historic lows. The federal funds rate will likely be maintained at 0%-1/4% through the end of 2014. The consensus is that inflationary pressures will remain subdued for the foreseeable future, but that recent spikes in energy costs will boost overall inflation higher for the short term, with core inflation continuing in the 2% range. The group also sees hopeful signs in the unemployment numbers and economic activity generally, but not enough to begin easing interest rates upward. The world’s largest central bank also plans on continuing to purchase long term government securities in conjunction with the above in an effort to further push long term interest rates down.

While one can understand why the Federal Reserve continues to pointlessly hold tight to the idea that staggering low interest rates must be kept in place–it’s the widely believed best method to stimulate economic growth and business investment–the policy is punishing senior citizens and responsible savers immeasurably. Bank account, money market, and Certificate of Deposit rates remain pitifully low as a direct result of the Federal Reserve’s action.  Seniors on fixed incomes and Social Security have seen meager cost of living adjustments. Moreover, through saving in liquid bank and credit union accounts and employing the prudent investment strategy of limiting their exposure to the volatility of the stock market, these seniors are effectively having their buying power pummeled backward.

There is little evidence that continued easing policy at the Federal Reserve is producing the same effects it once had immediately following the onset of the great recession. There is no evidence that the free money being provided to banks is ultimately being used to hire new workers, rather than to bolster bank balance sheets and meet leverage requirements. A federal funds rate of 0% punishes the very least able to absorb a hit in the interest income and Social Security they need to survive from month to month. Furthermore, it all but forces the young to open larger stakes in the stock market than they may have otherwise done, seeking investment return in the only available arena. If the Federal Reserve has true concern for unemployment, it is time to find another strategy to lower the overall unemployment rate and increase job market participation rates. For these reasons, it is time for the Federal Reserve to embark upon a new path, a path that does not punish those least able to handle the consequences.