At the conclusion of its two-day meeting Wednesday, the Federal Open Market Committee said that the government's stimulus and economic rescue actions have helped to stabilize the financial markets, which will help generate economic growth in the future.
"Economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased," the Fed said in a statement.
Meanwhile, the Fed said consumer spending is stabilizing, but that rampant job loss and tight credit has restrained overall household consumption. The Fed added that although the housing sector has begun to make a comeback, home sales and new home construction are coming off of historic lows.
As a result, the Fed kept its federal funds rate, an overnight lending rate that guides rates on various consumer and business loans, in a range of 0% to 0.25%. Rates have been at that level since December.
Last week, Federal Reserve chairman Ben Bernanke said that he thought the recession was "very likely over." But the Fed reiterated Wednesday that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." That's in spite of its forecast of a looming recovery and about a trillion dollars of rescue programs on its balance sheet.
In fact, the Fed said it would extend one such program, it's $1.45 trillion of mortgage-backed securities and debt purchases from Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), into the first quarter of 2010. It previously was scheduled to end those purchases at the end of this year.
The central bank continues to oversee dozens of other expensive economic rescue programs. The Fed said those programs have helped the economy rebound, but many experts believe the initiatives could contribute to out-of-control inflation if they are not pared back in time.
The Fed did note recent commodity price increases in its statement but added that it saw little threat of inflation in the near term.
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