Fed holds rates steady, will 'slow' one stimulus
WASHINGTON -- USA-FED/ (UPDATE 1):UPDATE 1-Fed seen holding US rates steady, ending bond buys
The Federal Reserve on Wednesday held interest rates steady and said it would "slow the pace" of an emergency bond-buying program that has so far pumped $253 billion into the economy.
Laying the groundwork for removing massive amounts of cash injected to fight the recession, the Fed said it will end its $300 billion program to buy Treasury securities at the end of October, rather than in September, as originally scheduled.
The program is aimed at pumping cash into the economy to lower rates on mortgages and other consumer debt, to encourage borrowing and spending.
In its statement, the Fed said: "To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee 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."
The Fed said the economy is stabilizing and inflation is under control.
"Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales," the committee said.
The interest rate move by the Fed's Open Market Committee was widely expected but was still welcomed on Wall Street, where stocks rose. The Fed's decision to keep the federal funds rate — the rate banks charge each other for short-term loans — at 0% to 0.25% follows a series of better-than-expected economic reports: The unemployment rate fell unexpectedly in July; manufacturing appears to have hit bottom; and productivity surged 6.4% in the second quarter.
