The Federal Reserve will keep its target range for the federal funds rate at 0% to 0.25%, the Federal Open Market Committee (FOMC) said Wednesday, noting general improvement in financial markets and the housing sector.
The FOMC also announced that the Fed's purchase of $1.25 trillion of agency mortgage-backed securities (MBS) and of up to $200 billion of agency debt will slow gradually, likely wrapping up by the end of the first quarter of 2010.
‘Although economic activity is likely to remain weak for a time, the committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability," the FOMC said in its statement.
In a separate statement, the New York Fed said it will "gradually reduce the average weekly purchase amounts of agency [MBS], starting with purchases conducted during the reporting week beginning Thursday, Sept. 24."
The New York Fed additionally stated that it would reduce the size and frequency of individual agency debt purchase operations, "with the frequency of agency debt purchases remaining, on average, once per week, before declining to once every two weeks at some point during the first quarter of 2010."
As previously announced, the Fed's purchases of $300 billion of Treasury securities will be completed by the end of next month.