Belfast Telegraph

Friday 25 July 2014

Fed vows to keep bank rate at record low level

The Federal Reserve has said the recession was easing, but the economy was likely to remain weak and keep a lid on inflation.

Against this backdrop, the Fed held a key bank lending rate at a record low of between zero and 0.25 %, and pledged again to keep it there for “an extended period”.

Even though energy and other commodity prices have risen recently, the Fed predicted inflation will remain “subdued for some time.”

“Information received since the Federal Open Market Committee (FOMC) met in April suggests that the pace of economic contraction is slowing,” the Fed said in a statement after concluding a two-day meeting.

This new language sought to ease Wall Street's concerns that the Fed's aggressive actions to revive the economy will spur inflation later on.

The Fed also decided to stay the course on existing programmes intended to drive down rates on mortgages and other consumer debt.

Instead, the central bank again kept the door wide open to making changes if economic conditions warrant.

The Fed in March launched a $1.2 trillion effort to drive down interest rates to try to revive lending and get Americans to spend more freely again. It said it would spend up to $300 billion to buy long-term government bonds over six months and boost its purchases of mortgage securities. So far, the Fed has bought about $177.5 billion in Treasury bonds.

The Fed is on track to buy up to $1.25 trillion worth of securities issued by Fannie Mae and Freddie Mac by the end of this year or early next year. Nearly $456 billion worth of those securities have been purchased

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