Fed leaves rates steady...sees weak US recovery

The Federal Reserve indicated yet again that it is no hurry to raise interest rates, saying that the US economy remains weak even though the worst recession in decades appears to be winding down. The US central bank reiterated its long-standing stance to keep interest rates exceptionally low for an extended period because it expects only a weak recovery. As anticipated, the Fed policymakers maintained the target range for the federal funds rate at 0 to 0.25%. "Economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations are likely to warrant exceptionally low levels of the federal funds rate for an extended period," the FOMC said in a statement.

Economic activity has continued to pick up and conditions in financial markets were roughly unchanged, the FOMC said. It added further that activity in the housing sector has increased over recent months. "Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit," the FOMC said.

Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales, the FOMC said. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the FOMC expects inflation to remain subdued for some time.