FOMC Leaves Rates Alone; Fed to Buy More Treasuries

The Federal Open Market Committee yesterday left the target range for its federal funds rate at 0.0% to 0.25%, anticipating that economic conditions were likely to warrant exceptionally low levels of the fed funds rate for an extended period.

In the statement released at the conclusion of its meeting, the FOMC said that the economy continued to contract.

“Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending,” the statement said.

“Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

“In light of increasing economic slack here and abroad, the committee expects that inflation will remain subdued,” the statement added.

The Fed said it would employ all available tools to promote economic recovery and to preserve price stability including the purchase of up to an additional $750 billion of agency mortgage-backed securities and the purchase of up to $300 billion of longer-term Treasury securities over the next six months.

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