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Thursday, 25 June 2009

Recession is easing: Fed

WASHINGTON - THE Federal Reserve on Wednesday said the recession is easing, but that the economy likely will 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 per cent, and pledged again to keep it there for 'an extended period' to help brace activity going forward.

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

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

The Fed also decided to stay the course on existing programs 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 US$1.2 trillion (S$1.8 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 US$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 US$177.5 billion in Treasury bonds.

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

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