WASHINGTON, June 24 (Xinhua) -- The U.S. Federal Reserve
on Wednesday kept a key interest rate unchanged at a record low of between zero
to 0.25 percent to support the world's largest economy which has been in a
recession since December 2007.
Information received recently suggested that "the
pace of economic contraction is slowing," the Fed said. But it also noted that
"economic activity is likely to remain weak for a time."
File photo taken on June 1, 2009 shows
the Wall Street Bull statue in New York, the United States. The U.S.
Federal Reserve on June 24 kept a key interest rate unchanged at a record
low of between zero to 0.25 percent to support the world's largest economy
which has been in a recession since December 2007. (Xinhua/Liu
Xin) Photo
Gallery>>>
In
recent month, conditions in financial markets have generally improved, said the
central bank in a statement following its two-day policy-making meeting in
Washington.
Meanwhile, "household spending has shown further
signs of stabilizing but remains constrained by ongoing jobs losses, lower
housing wealth, and tight credit," it said.
"Businesses are cutting back on fixed investment and
staffing but appear to be making progress in bringing inventory stocks into
better alignment with sales," it added.
Although the recession is easing, the Fed believes
that the economy will keep a lid on inflation.
"The prices of energy and other commodities have
risen of late. However, substantial resource slack is likely to dampen cost
pressures," and the Fed "expects that inflation will remain subdued for some
time," the Fed said.
Against this backdrop, the Fed decided to hold the key interest rate, or federal funds rate, which commercial banks charge each other for overnight loans, unchanged.
A man walks in front of the U.S. Federal Reserve building in Washington, June 24, 2009. (Xinhua/Reuters Photo) Photo Gallery>>>
The decision means that commercial banks' prime
lending rate, used to peg rates on home equity loans, certain credit cards and
other consumer loans, will stay around 3.25 percent, the lowest rate in decades.
Moreover, the Fed said that the interest rate is
likely to remain at the current low level for "an extended period."
The Fed also decided to stay the course on existing
programs intended "to provide support to mortgage lending and housing markets
and to improve overall conditions in private credit markets."
As announced in March, the Fed will purchase a total
of up to 1.25 trillion dollars of agency mortgage-backed securities and up to
200 billion dollars of agency debt by the end of the year. Now, nearly 456
billion dollars worth of those securities have been purchased.
In addition, the Fed will buy up to 300 billion
dollars of Treasury securities by autumn, as part of its plan to bring down
interest rates it cannot directly control, according to the statement. So far,
the Fed has bought about 177.5 billion dollars in Treasury bonds.
Doing so would help the ailing economy because many
kinds of debt -- from mortgages to corporate bonds -- are linked to Treasury
rates. Fed purchases could boost Treasury prices and drive down their rates.
That would ripple through and lower rates on other kinds of debt.
The Fed's decision to leave the interest rate
unchanged was in line with economists' expectations.
Most economists believe that the Fed will keep the
target range for its bank lending rate between zero and 0.25 percent through the
rest of this year and probably into next year to help spur the economy.
Fed Chairman Ben Bernanke has predicted that the
recession will end later this year. On Wednesday, the Fed said it continues to
anticipate that policy actions, fiscal and monetary stimulus, and market forces
will contribute to "a gradual resumption of sustainable economic growth in a
context of prices stability."
In the first quarter of this year, the U.S. economy
shrank at an annual rate of 5.7 percent, slightly less than the 6.3 percent drop
in the previous quarter. Economists are predicting the contraction will slow the
current April-June period as the government's stimulus begins to take hold.
On Wednesday, the statement also indicated that the
Fed keeps the door wide open to making changes if economic conditions warrant.
The Fed "will continue to evaluate the timing and
overall amounts of its purchases of securities in light of the evolving economic
outlook and conditions in financial markets," said the statement.
"The Federal Reserve is monitoring the size and
composition of its balance sheet and will make adjustments to its credit and
liquidity programs as warranted," it added.
NEW YORK, June 24 (Xinhua) -- Wall Street capped mixed
Wednesday, as the U.S. government reported orders to U.S. factories for
big-ticket manufactured goods rose sharply for a second straight month in May,
while higher U.S. dollar weighed on the big board. Full story
WASHINGTON, June 23 (Xinhua) -- U.S. President Barack
Obama has said that he does not think a second economic stimulus package is
needed yet even though the nation's economy continues to struggle.
More time is needed to assess the effectiveness of
the 787-billion-dollar economic stimulus plan, the administration's first one,
enacted early this year, Obama told a press conference held Tuesday in the White
House. Full story
WASHINGTON, Feb. 17 (Xinhua) -- U.S. President Barack
Obama on Tuesday signed a 787-billion-dollar economic stimulus bill into law in
Denver, Colorado, calling it the first step to pave the way to long-term growth.
The sweeping economic rescue package, the American
Recovery and Reinvestment Act, is designed to jolt the ailing U.S. economy by
providing government spending and tax cuts for both individuals and
businesses. Full story
