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Federal Reserve sees signs recession might be easing

April 30, 2009

 

 

by Jeannine Aversa
The Associated Press

The Federal Reserve said Wednesday it see signs the recession is easing and that the U.S. economic outlook has "improved modestly" since last month.

Against that backdrop, Fed Chairman Ben Bernanke and his colleagues left a key interest rate at a record low of between zero and 0.25 percent, and decided against taking any new steps to shore up the economy.

Aggressive action already taken — including a $1.2 trillion effort last month — should gradually help bolster economic activity, the Fed said. It did, however, leave the door open to future action if needed.

Fed policymakers offered a less dour assessment of the economy than the one provided at its previous meeting in mid-March.

"The economy has continued to contract, though the pace of contraction appears to be somewhat slower," the Fed said. The worst of the recession — in terms of lost economic activity — could be past.

The economic outlook has "improved modestly" since the March meeting, partly reflecting some easing of strains in financial markets, the Fed said. Even so, "economic activity is likely to remain weak for a time," the Fed added.

And, while consumer spending has shown "signs of stabilizing," it is still being constrained by rising unemployment, falling home values and hard-to-get credit, the Fed said.

Meanwhile, weak sales and credit difficulties have forced businesses to cut spending and lay off workers, the Fed said.

To nurture economic activity, the Fed pledged anew to keep its key bank lending rate at a record low "for an extended period." Economists predict the Fed will keep the rate there well into next year.

Looking ahead, the Fed didn’t rule out expanding existing programs or creating new ones to bolster the economy.

At its March meeting, the Fed launched a $1.2 trillion effort to lower interest rates and get Americans to boost spending, which would help spur economic activity.

Specifically, the Fed in March said it would start buying government debt — $300 billion over the next six months — and would buy an additional $850 billion worth of mortgage-backed securities and debt from mortgage giants Fannie Mae and Freddie Mac.

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