By — PBS News Hour PBS News Hour Leave your feedback Share Copy URL https://www.pbs.org/newshour/economy/business-jan-june09-fedrate_01-28 Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter Fed Leaves Key Rate at Record Low, Vows to Use All Tools to Help Economy Economy Jan 28, 2009 4:00 PM EDT The Fed said in a statement that it is prepared to buy longer-term Treasury securities if that “would be particularly effective in improving conditions in private credit markets.” At its December meeting, the Fed reported it was merely evaluating that option. “Basically they are opening their wallets and are ready to start buying more assets and extend that if necessary,” said Kurt Karl, head of economic research at Swiss Re in New York, according to Reuters. In a statement issued at the end of a two-day meeting, the central bank’s policy-setting panel also said it was holding its target range for overnight interest rates at zero to 0.25 percent — the level reached in December — and repeated that rates could stay unusually low for some time. The panel voted 8-1 in support of the decision. Richmond Federal Reserve Bank President Jeffrey Lacker dissented, saying he thought the Fed should move to a program to purchase government bonds. After slashing its key rate to record lows at its previous meeting, the central bank pledged anew to look to other unconventional ways to revive the economy. Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in housing, credit and financial markets that — taken together– haven’t been seen since the 1930s. Despite the Fed’s aggressive rate-cutting campaign, a string of bold Fed programs and a $700 billion financial bailout program run by the Treasury Department, credit and financial markets are still stressed and far from normal. Yet, the Fed statement said there’s been some thawing of frozen credit conditions. “Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight,” the statement said. The central bank said it will be launching a program aimed at bolstering the availability of consumer loans. Under the program, which is expected to start in February, up to $200 billion will be made available to spur auto, student and credit card loans as well as loans to small businesses, the Associated Press reported. To do that, the Fed will buy securities backed by those different types of consumer debt. The Fed also hopes that action will lower rates on those loans. The central bank is endeavoring to ensure a year-long recession does not lead to a prolonged period of falling prices that could further undermine activity. “The committee continues to anticipate that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant,” it said. We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now By — PBS News Hour PBS News Hour
The Fed said in a statement that it is prepared to buy longer-term Treasury securities if that “would be particularly effective in improving conditions in private credit markets.” At its December meeting, the Fed reported it was merely evaluating that option. “Basically they are opening their wallets and are ready to start buying more assets and extend that if necessary,” said Kurt Karl, head of economic research at Swiss Re in New York, according to Reuters. In a statement issued at the end of a two-day meeting, the central bank’s policy-setting panel also said it was holding its target range for overnight interest rates at zero to 0.25 percent — the level reached in December — and repeated that rates could stay unusually low for some time. The panel voted 8-1 in support of the decision. Richmond Federal Reserve Bank President Jeffrey Lacker dissented, saying he thought the Fed should move to a program to purchase government bonds. After slashing its key rate to record lows at its previous meeting, the central bank pledged anew to look to other unconventional ways to revive the economy. Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in housing, credit and financial markets that — taken together– haven’t been seen since the 1930s. Despite the Fed’s aggressive rate-cutting campaign, a string of bold Fed programs and a $700 billion financial bailout program run by the Treasury Department, credit and financial markets are still stressed and far from normal. Yet, the Fed statement said there’s been some thawing of frozen credit conditions. “Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight,” the statement said. The central bank said it will be launching a program aimed at bolstering the availability of consumer loans. Under the program, which is expected to start in February, up to $200 billion will be made available to spur auto, student and credit card loans as well as loans to small businesses, the Associated Press reported. To do that, the Fed will buy securities backed by those different types of consumer debt. The Fed also hopes that action will lower rates on those loans. The central bank is endeavoring to ensure a year-long recession does not lead to a prolonged period of falling prices that could further undermine activity. “The committee continues to anticipate that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant,” it said. We're not going anywhere. Stand up for truly independent, trusted news that you can count on! Donate now