Fed Says Economy Moderating, Leaves Rates Alone

Washington, DC, Aug. 13, 2009--The Federal Reserve's Open Market Committee said Wednesday that it will keep interest rates exceptionally low "for an extended period of time."

In its statement after a two-day meeting, the policy-setting FOMC said it would slow its purchases of long-term Treasurys and let the program die a natural death by the end of October, a decision that could send long-term yields higher.

The Fed also said its policies are working and expressed no desire to tighten its extremely loose monetary policy. The federal funds target rate will remain at 0% to 0.25%.

"Economic activity is leveling out," the FOMC said. "Conditions in financial markets have improved further in recent weeks.

"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," the statement said.

FOMC said it expected the economy to remain weak for a time. With so many unused resources, cost pressures would be minimal and "inflation would remain subdued for some time."