Fed leaves rates steady

No surprise here. As expected, the Federal Reserve left interest rates near zero and said that the world's largest economy is well on the path to recovery. The only major worry is that the current weakness in the job market could continue for a while. The FOMC kept its federal funds rate, an overnight lending rate that guides rates on various consumer and business loans, in a range of 0% to 0.25%. Rates have been at that level since December. "Economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased," the Federal Open Market Committee (FOMC) said at the end of its two-day meeting. It was the first time since August 2008 in which the FOMC said that the US economy has improved from its previous meeting. The Fed reiterated that current economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Separately, the Fed and US Treasury said they are scaling back emergency programs aimed at combating the worst financial crisis since the Great Depression. The US central bank said it will further shrink auctions of cash loans to banks and Treasury securities to bond dealers, reducing the combined initiatives to US$100bn by January from US$450bn. The Treasury has begun the process of exiting from some emergency programs, the chief of the government’s US$700bn financial-rescue fund said separately. In its policy statement, the Fed said it will complete its planned US$1.25 trillion in purchases of mortgage securities and extended the end-date of the program to March from December.