Fed detects a pulse in the US economy, keeps rate unchanged

The Federal Reserve says the U.S. economy continues to contract, although at "somewhat slower" pace.

"Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit," the Federal Open Market Committee (FOMC) said in a statement today.

The Federal Funds target rate remained unchanged at zero to one-quarter of one percent.

"That they didn't make changes to the targets is good news at this point," Susan Phillips, former Federal Reserve governor said on Bloomberg Television today. "We could use some stability."

The Fed anticipates low levels for the Fed Funds rate for an "extended period" because of the economic conditions.

Inflation is expected to remain "subdued" because of "increasing economic slack" in the U.S. and around the world, the FOMC said. There is "some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."

The Federal Reserve will use "all available tools" to encourage an economic recovery and to help maintain stable prices. The Fed is also encouraging lending to home and business owners.

This pulse regarding the health of the U.S. economy is based on information collected since the Federal Open Market Committee met in March.

As previously announced, the Fed said it will buy up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. The Fed will also purchase up to $300 billion of Treasury securities by autumn.

"The committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets," the Fed said in the statement.

The news comes after after a two-day FOMC meeting led by Fed Chairman Ben S. Bernanke in Washington.
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