Federal Reserve says full economic recovery to take 3 more years

The Federal Reserve signaled on Wednesday that a full economic recovery could take nearly three more years, and it went further than ever to assure consumers and businesses that they will be able to borrow cheaply well into the future.

The central bank said it would probably not increase its benchmark interest rate until late 2014 at the earliest - a year and a half later than it had previously said.

The new timetable showed the Fed is concerned that the recovery remains stubbornly slow . But it also thinks inflation will stay tame enough for rates to remain at record lows without igniting price increases.

Chairman Ben Bernanke cautioned that late 2014 is merely its "best guess." The Fed can shift that plan if the economic picture changes. But he cast doubt on whether that would be necessary.

"Unless there is a substantial strengthening of the economy in the near term, it's a pretty good guess we will be keeping rates low for some time," he said.

The Fed has kept its key rate at a record low near zero for about three years. Its new time frame suggests the rate will stay there for roughly an additional three years.

The bank's tepid outlook also suggests it's prepared to do more to help the economy. One possibility is a third bond-buying program that would seek to further drive down rates on mortgages and other loans to embolden consumers and businesses to borrow and spend more.

In a statement after a two-day policy meeting, the Fed said it stands ready to adjust its "holdings as appropriate to promote a stronger economic recovery in the context of price stability."

Treasury yields fell after the midday announcement. But yields stopped falling after the bank later issued forecasts for the economy and interest rates. They showed that while some members foresee super-low rates beyond 2014, six of the 17 members forecast a rate increase as early as this year or next.

It was the first time the Fed had released interest-rate forecasts from its committee members. It will now do so four times a year, when it also updates its economic outlook.