Tuesday, January 27, 2009

Fed Expected to Keep Rates at Record Lows; Examines other Methods of Revitalizing Economy

Federal Reserve Chairman Ben Bernanke and his colleague will be opening a two-day meeting this afternoon where they will reassess the current state of economy and financial conditions. It is almost certain that they will leave the key interest rate at a record low to battle the stubborn recession.

At last month’s meeting, the Fed made history by slashing its key rate from 1 percent to a new, targeted range of between zero and 0.25 percent. Many economists anticipate that the Fed will leave rates at that range throughout the rest of 2009.

The Fed may also unveil new actions to deal with the housing, credit and financial crises. Known options currently include a program that would make $200 billion available to spur auto, student and credit card loans as well as loans to small businesses, the expansion of a program that was started at the beginning of this year to buy up to $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, and the begining of a series of long-term Treasury securities purchases by the Fed.

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