January 28, 2009

Fed maintains key lending rate

The U.S. Federal Reserve said Wednesday it would maintain its current federal fund rate between zero and 0.25 percent, as the economy remains weak.

The decision was highly anticipated and the Fed indicated a change was not likely soon.

Economic conditions are likely to warrant exceptionally low levels for the federal funds rate for some time, a statement released by the central bank's Open Market Committee said.

Data from December suggests that the economy has weakened further, the statement said.

Consumers and businesses have cut back spending, the statement said. The Fed also pointed to falling industrial production, a decline in housing starts and increased unemployment.

In addition, the Fed said declining commodity prices indicate that inflation pressures will remain subdued in coming quarters.

The Committee predicted a gradual recovery in economic activity will begin later in the year, but noted downside risks were significant.