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17 December 2008

Fed cuts rate close to zero


The Federal Open Market Committee decided to establish a target range for the federal funds rate of 0 to 1/4 percent. It expects that these exceptionally low levels of the federal funds rate will remain for some time. 

The Federal Open Market Committee decided to establish a target range for the federal funds rate of 0 to 1/4 percent. It expects that these exceptionally low levels of the federal funds rate will remain for some time. 

 

In its statement on the decision, the Fed states that the outlook for economic activity has weakened further and financial markets remain quite strained and credit conditions tight. Meanwhile, inflationary pressures have diminished appreciably.

 

Over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant, the statement reads. 

 

The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.  Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

 

Press release

 



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