September 23, 2009

Fed leaves lending rate unchanged

The U.S. Federal Reserve said Wednesday it would keep bank-to-bank lending rates unchanged despite improvements in the economy.

Recent data suggest that economic activity has picked up following its severe downturn, the Fed said in a statement. Nonetheless, the bank's Open Market Committee said inflation worries remained subdued, leaving it the option of keeping lending rates at zero to 0.25 percent.

The Fed repeated a refrain it has used in recent releases, that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Fed noted household spending seemed to be stabilizing, but said job losses had kept accelerated spending in check. Businesses are still cutting back on fixed investment and staffing, though at a slower pace, the Fed said anticipating economic activity is likely to remain weak for a time.

The Fed said it would stay the course on a program to buy $1.25 trillion in mortgage-backed securities and up to $200 billion of agency debt.