Fed to keep interest rate near zero for 2 years

WASHINGTON (AP) — The Federal Reserve sketched a dim outlook for the economy today, suggesting it will remain weak for two more years. As a result, the Fed said it expects to keep its key interest rate near zero through mid-2013.

It's the first time the Fed has pegged its "exceptionally low" rates to a specific date. The Fed had previously said only that it would keep its key rate at record lows for "an extended period."

The Fed's synopsis and its implications for the economy led to a wild afternoon of trading on Wall Street. Stocks plunged after the statement was released, but then shot up shortly after. The Dow Jones industrial average sank more than 176 points, then recovered its losses and gained more than 265 points in late-afternoon trading.

Many investors sought the safety of long-term Treasurys. The yield on the 10-year Treasury note fell as low as 2.07 percent, nearly hitting its historic low of 2.05 percent.

The two-year time frame for any rate increase underscored a stark reality: A sluggish economy and painfully high unemployment have become chronic.