Thursday, April 30, 2009

Federal Reserve leaves borrowing rates low

The U.S. Federal Reserve left a key lending rate unchanged and at a record low Wednesday as the central bank tries to prop up the economy.

The Fed left the target range for the federal funds rate at zero to 0.25 per cent, adding that it expects to leave rates low for an extended period of time.

Since the Fed's last rate decision in March, the U.S. economy has continued to contract, but the bank sees the pace of contraction slowing somewhat.

"Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth and tight credit," the bank said.

"Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time."

The Fed added that it sees inflation remaining subdued.