Fed Leaves Key Rate Unchanged

The Federal Reserve announced it will maintain its target for the federal funds rate in the 0 percent to 0.25 percent range, and continues to expect economic conditions to warrant exceptionally low levels of the federal funds rate for an extended period of time. "Information ... suggests that economic activity has continued to strengthen and that the labor market is beginning to improve," the Fed said in a prepared statement.

"Growth in economic household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit," the Fed said. "Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability."

In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities; it closed on March 31 for loans backed by all other types of collateral.

Source: Board of Governors Federal Reserve System