Fed Holds Key Interest Rate Near Zero

Washington, DC, Jan. 28, 2009--The Federal Reserve on Wednesday moved a step closer to purchasing longer-term Treasury securities if needed to improve conditions in private credit markets.

The Federal Open Market Committee kept its interest rate target in a range of zero to 0.25%, as expected. Rates will need to stay close to zero for "some time," the statement said.
 
The lack of action on interest rates was expected, as was the FOMC's statement that rates were likely to stay low for a considerable length of time.

All of the action in the statement was related to the Fed's continuing efforts to flood the financial system with money.
 
The Fed has adopted a "throw the kitchen sink" approach to combating the downturn, which is being fueled in part by weak banks.

Buying longer-term Treasurys would be a new tool in the Fed's arsenal to repair financial markets. Some economists worry that buying Treasurys would cause foreign investors to lose their appetite for the securities.

"The Fed will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the statement said.