The economy remains “very weak, though declines in activity seemed to be lessening,” according to minutes of the Federal Open Market Committee meeting of June 23-24, released yesterday.

“Employment was still falling, and manufacturers had cut production further in response to excess inventories and soft demand,” the minutes said.

“But the reductions in employment and industrial production had slowed somewhat, consumer spending appeared to be holding reasonably steady after shrinking in the second half of 2008, and sales and construction of single-family homes had apparently flattened out.

“In their discussion of monetary policy for the period ahead, committee members agreed that the stance of monetary policy should not be changed at this meeting,” the minutes continued.

“Given the prospects for weak economic activity, substantial resource slack, and subdued inflation, the committee agreed that it should maintain its target range for the federal funds rate at 0 to 1/4%.

“The future path of the federal funds rate would depend on the committee’s evolving expectations for the economy, but for now, members thought it most likely that the federal funds rate would need to be maintained at an exceptionally low level for an extended period, given  their forecasts for only a gradual upturn in activity and  the lack of inflation pressures.”

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