The Federal Open Market Committee, citing concern over a deepening economic recession, today said it is keeping the target range for its benchmark overnight interest rate at 0% to 0.25% and may buy long-term Treasuries.
The discount rate the Fed charges to commercial banks for direct lending also remained at 0.50%.
The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth, said the statement issued by the FOMC, the rate-setting arm of the Federal Reserve.
The Fed has no room left to influence market rates via changes in the federal funds rate, but the U.S. central bank said in the statement it is prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets. The central bank will also continue to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, the statement said.
What the Fed needs to do, and the Obama administration needs to do, more than anything, is to build confidence, said Ron Egalka, president and CEO of Rampart Investment Management, which has $13 billion in assets under management. Investors are going to remain very skeptical until we understand where the problems are and how to get to the other side of this difficult period.